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Pacific Natural Sdn Bhd is financed by three sources of funds which are bonds, preference shares and ordinary shares. Below are the details of the
Pacific Natural Sdn Bhd is financed by three sources of funds which are bonds, preference
shares and ordinary shares.
Below are the details of the financing:
The bonds were sold at RM par value, percent annual coupon, years bond. An
average discount of RM per bond was given to compensate for lower coupon interest
rate. The firm also incurred a floatation cost of RM per bond.
The preference shares were sold at RM dividend per share, at a price of RM per
share.
The ordinary shares currently pay a dividend of RM per share and has a share price
of RM The dividend is expected to grow at percent in future.
Pacific Natural Sdn Bhd has a marginal tax of percent.
Required:
a Calculate the after tax costs of debt, cost of preference share and cost of ordinary share.
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