Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Miss Azlin is the newly appointed Finance Manager at Suasana Berhad. Her first assignment is to report to the Board of Directors on the
Miss Azlin is the newly appointed Finance Manager at Suasana 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: Current Assets Inventories Machine & equipment Total Asset Information: Suasana Berhad Summary of Balance Sheet For Year Ended 2022 RM 50,000 Long term debt 20,000 Current Liabilities 10,000 Preferred stocks Common stocks 80,000 Total Liabilities and Equities RM 28,000 2,000 10,000 40,000 80,000 Long-term debt consists of 9% coupon bonds and a yield of maturity maturing in five years. The face value of the bond is RM1, 000. Suasana Berhad issue perpetual preferred stock at a price of RM100 a share. The stock is paying a constant annual dividend of RM8.50 a share and has a required rate of return, of 13.4 percent. Market risk-free rate is 9% and the average return on the market is 15%. The company's equity beta is 1.2. Corporate tax is 35% per annum. From the above information you are required to: a. determine the: i. cost of common stocks. (2 Marks) (2 Marks) ii. cost of debt iii. cost of preferred stocks (2 Marks) b. based on your calculation in part (a), determine Suasana Berhad's Weighted Average Cost of Capital (WACC). (4 Marks)
Step by Step Solution
★★★★★
3.42 Rating (152 Votes )
There are 3 Steps involved in it
Step: 1
a i Cost of common stocks To calculate the cost of common stocks use the capital asset pricing model CAPM formula Cost of common stocks Riskfree rate ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started