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Miss Ain is the newly appointed Finance Manager for Kebun Bunga Berhad. Her first assignment is to report to the Board of Directors on
Miss Ain is the newly appointed Finance Manager for Kebun Bunga Berhad. Her first assignment is to report to the Board of Directors on the company's current cost of capital. She is presented with the following information: Kebun Bunga Berhad Summary of Financial Position For Year Ended 2022 RM RM Current Assets 30 000 Long term debt 32 000 Inventories 20 000 Common stock 40 000 Plant & equipment 50 000 Preferred stocks 28 000 Total Asset 100 000 Total Liabilities and Equities 100 000 Long-term debt consists of 10% coupon bonds maturing in five years. The face value of the bond is RM1 000 and the yield to maturity is 12%. Kebun Bunga Berhad issue perpetual preferred stock at a price of RM47.50 a share. The stock is paying a constant annual dividend of RM3.80 a share. The market risk-free rate is 6% and the average return on the market is 15%. The company's equity beta is 1.2. Corporate tax is 40% per annum. From the above information you are required to: a. determine the: i. cost of common stocks. ii. cost of debt. iii. cost of preferred stocks. (2 Marks) (2 Marks) (2 Marks)
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