INSTRUCTION TO CANDIDATES: For each question you are answering, please use a new page Partial credits will be given for all working Question 1: General Lumber Berhad (GL) CFO has as Berhad (GL) CFO has asked its Finance Manager to measure the werage cost of capital. GL targeted capital structure are given below: Long Term Debt Preferred stock Common stock equity 40% 10% 50% Debt: 10 years ago. Gl issued a Sam worth of 20-year band carrying a coupon rate of oo with interest being paid semi-annually. The boods are currently yielding 8.5%. The company is in the 40% tax bracket Preferred stock: 20,000 shares with an annual dividend 8%, having a par value of $100 ench, currently having an expected return of 9% Common stock: There are 2,000,000 shares issued, currently trading at $40 per share. Expected dividend to be paid at the end of the year (2019) is $3 per share. Its dividends are expected to grow at the rate of 6% per year for some foreseeable future. a) Determine GL weighted average cost of capital using market value and target capital structure weights. (20 marks) b) Which of these WACCs (calculated as in (a) above] should be used for GL investment decision making? Explain. (2 marks) c) GL is considering the following investment opportunities, all having average risk: Investment Initial Opportunity Schedule IRR % Investment S 9.90 2.000.000 10.23 3.000.000 9.51 1.000.000 9.72 2,000,000 10,67 4,000,000 Which projects, if any, should the company select and what is the total investment for the coming year? (3 marks) Total: 25 marks