Instruction: Answer ALL questions QUESTION 1 (20 marks) Makmur Corporation manufactures industrial type sewing machines. Makmur Corp received a very large order from a few Asian countries. In order to be able to supply these countries with its products, Makmur will have to expand its facilities. Of the required expansion, Makmur feels it can raise RM75 million internally, through retained earnings. The firm's optimum capital structure has been 30% debt, 20% preferred stock and 50% equity. The company will try to maintain this capital structure in financing this expansion plan. Currently Makmur's common stock is traded at a price of RM20.00 per share. Last year's dividend was RM1.50 per share. The growth rate is 8%. The company's preferred stock is selling at RM50.00 and has been yielding 6% in the current market. Flotation costs have been estimated at 8% of common stock and 3% of preferred stock. Makmur Corp. has bonds outstanding at 10%, but its investment banker has informed the company that interest rates for bonds of equal risk are currently yielding 9%. Makmur's tax rate is 28%. REQUIRED: a.Compute the cost of Kd, Kp, Ke Kn [10 marks b. Calculate the weighted average cost of capital using Ke. [4 marks] c. How large a capital structure can the firm support with retained earnings financing? [3 marks] d. Why do you think some managers employ the subjective approach in assigning a discount rate to proposed projects? [3 marks)