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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 RM1,000 par value, 8 percent annual coupon, 10 years bond. An
average discount of RM30 per bond was given to compensate for lower coupon interest
rate. The firm also incurred a floatation cost of RM20 per bond.
The preference shares were sold at RM6.00 dividend per share, at a price of RM42 per
share.
The ordinary shares currently pay a dividend of RM4.00 per share and has a share price
of RM30. The dividend is expected to grow at 6 percent in future.
Pacific Natural Sdn Bhd has a marginal tax of 35 percent.
Required:
(a) Calculate the after tax costs of debt, cost of preference share and cost of ordinary share.

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