IMPORTANT PLEASE ....................

(b) You have been assigned a task to estimate the cost of capital of your company, Your colleagues have provided you the following information to assist your calculation: The capital structure of the company is 30% long-term debt, 5% preferred stock and 65% common equity. The company falls under 24% marginal tax bracket. The long-term debt financing of the company solely comes from the 7% corporate bonds, which has par value of RM1,000 per bond. The bond has 10 years remaining maturity and pays coupons to its holder semiannually. The current market price of the bond is RM1,100 and new corporate bonds can be issued at 5% flotation costs of the bond price. The company has issued a batch of 6% preferred stocks at par value of RM50. The current market price of the preferred stock is RM55. New preferred stock can be issued at flotation costs equal to 5% of stock price. The common stock of the company has a par value of RM1 per stock. The current market price and the last paid annual dividend of the common stock are RM40 and RM2 respectively. Analyst predicts that the dividend will grow at a constant rate of 8% per year. New common stock can be issued at flotation costs of RM2 per share. The company has retained earnings of RM30 million. To date, 60% of the retained earnings has been used for capital expenditure. You are required to determine the current weighted average cost of capital (WACC) of the company using the market value approach. (10 marks)