Madam Zurin is the Financial Manager of DDNK Bhd. She is responsible of identifying the lowest possible cost of raising capital for new projects to be undertaken by the company. DDNK Bhd has been raising capital optimally and the following are the present capital structure of the company: Sources RM Bonds 3,600,000 Preference shares 2,400,000 Ordinary shares 5,400,000 Retained earnings 600,000 Madam Zurin determines that the company has several options to raise the needed capital: 1. Issue RM1,000 par value, 10 years redeemable bonds at a discount of 10% from the par value, paying annual interest at 8%. The flotation cost is 2% of the market price and the bonds will be redeemed at RM1,100. 2. Issue preference shares with a nominal value of RM100, which would pay dividend of RM12 each. The shares can be sold to the public at a discount of 3% and cost associated with the issue is 2% of the nominal value. 3. Ordinary shares are currently selling at RM20 per share. If new shares are to be issued, the flotation cost is calculated to be 12% of the market value. The dividend paid out is RM1.20 per share. Based on the current trends, ordinary share dividends are expected to grow at a constant rate of 8% per annum. 4. The company's dividend policy states that retained earnings can be fully utilized for future projects. The corporate tax rate is 24%. Required: a. Calculate the individual cost of capital for: i. Bonds (after tax) ii. Preference shares iii. Internal equity iv. External equity b. The company plans to undertake a capital investment project with an initial outlay of RM1,800,000. Advise Madam Zurin regarding the cost that will be incurred for the cost of equity