How to solve according to the malaysian finance atandaestandards

QUESTION $4$

EliteCorp Inc. has the following capital structure, which it deems optimal:

Common Shares: RM$100,000$

Retained Earnings: RM$80,000$

$5\%$ Preference Shares of RM$100$ each: RM$30,000$

$7\%$ Debt of nominal value RM$1,000$: RM$40,000$

Additional information:

i$.$ The current market value of debentures is RM$1,100$ each with flotation costs of

RM$95$ per debt. The debts can be redeemed at par after $8$ years.

ii$.$ The preference shares sell at RM$100$ each, and flotation costs are $5\%$ of the market

price.

iii. Common shares sell for RM$50$ each with flotation costs of RM$2\mathrm{.}50$ per share. Last

year's dividend was RM$2\mathrm{.}50$ per share, and the expected annual growth rate is

$10\%.$

iv$.$ Retained earnings available for reinvestment amount to RM$50,000,$ and the tax

rate is $25\%.$

Required:

a$.$ Compute :

i$.$ After$-$tax cost of debt.

ii$.$ Cost of Preferred stock.

$(10$ marks$)$

iii. Cost of Retained earnings.

$(3$ marks$)$

$(4$ marks$)$

iv$.$ Cost of New common shares.

$(5$ marks$)$

b$.$ If the company plans to undertake a project costing RM$75,000,$ evaluate the company's

weighted average cost of capital.

$(4$ marks$)$

c$.$ Assess the concept of capital structure and its significance in corporate finance

decision$-$making.