Q6. A firm's optimal capital structure: A. Is generally a mix of 40 percent debt and 60 percent equity. B. Exists when the debt-equity ratio is 0.50. C. Is the debt-equity ratio that exists at the point where the firm's weighted after tax cost of debt is minimized. D. Is the debt-equity ratio that results in the lowest possible weighted average cost of capital. (1 mark) Q7. Walid IQ Berhad's last annual dividend was 40 sen per share and both earnings and dividend are expected to grow at a constant rate of 3 per cent. Currently the share sells for RM3.20 per share. The Company's beta coefficient is 4.5, the return of a market portfolio is 5 per cent and the risk-free rate is 2 per cent. Calculate the cost of retained earnings using the Gordon's growth model and the capital asset pricing model (CAPM). A. 17.87%; 16.86% B. 5.87%; 5.65% C. 15.875%; 15.5% D. 23.26%; 22.87% (1 mark) Q8. Suria Berhad is considering to finance a new project by issuance of 8% Debentures of RM200,000. Assume tax rate is 24%, which of the following is NOT the effect following issuance of debentures? A. The cost of equity capital of Suria Berhad will increase. B. The value of the firm will increase by RM48,000. C. The weighted average cost of capital will increase. D. The financial risk of the firm will increase. (1 mark)