IOI Berhad is currently trying to calculate its weighted average cost of capital. As the company's finance director, you have been asked to perform the necessary calculations, using both book values and market values. You have the following information:

Balance sheet as at 31 December

	RM 000
Fixed assets	445
Current assets	185
Current liabilities	(110)
11% bonds (redeemable in 5 years)	(80)
10% irredeemable bonds	(95)
Bank loans	(60)
	285
Ordinary shares (25cents par value)	90
9% preference shares (RM1 par value)	50
Reserves	145
	285

i. The current dividend is 30 cents per share. Dividends in the future are expected to

grow at a rate of 5% per year.

ii. Corporation tax currently stands at 25%.

iii. The interest rate on bank borrowings currently stands at 13%

iv. Assume below securities are traded and their market prices as at 31 December:

Ordinary shares: RM1.76

Preference shares: 67 cents

11% bond: RM95 per RM100 bond

10% irredeemable bond: RM72 per RM100 bond

Required:

What is the WACC based on book value weighting scheme?

What is the WACC based on market value weighting scheme?

Which weighting scheme is preferred in calculating the WACC? Why?