Question 1 a) GoCo. Stock has a beta of 1.66. If the expected market return is 15.2% and the risk- free rate is 5.2%, what is the appropriate required return of Go Co.? (5 marks) b) A firm has determined its optimal structure which is composed of the following sources and target market value proportions. Source of Capital Long-term debt Common stock equity Target Market Proportions 25% 75% Debt: The firm can sell a 15-year, RM1,000 par value, 8 percent bond for RM1,050. A flotation cost of 2 percent of the face value would be required. Common Stock: A firm's common stock is currently selling for RM75 per share. The firm just paid a dividend of RM5. The growth rate of dividends is constant, that is at 10% every year. It is expected that selling, a new common stock issue must be underpriced RM2 per share and the firm must pay RM1 per share in flotation costs. If the firm's marginal tax rate is 40 percent, i. Calculate the firm's after-tax cost of debt. (5 marks) ii. Calculate the firm's cost of a new issue of common stock. (5 marks) iii. Calculate the firm's weighted average cost of capital, assuming the firm plans to pay out all of its earnings as dividends. (5 marks) c) What is cost of capital and why it is important to the business? (5 marks) (TOTAL: 25 MARKS)