QUESTION 2 The Empire Rail Bhd (Empire) won a sub-contract to construct 69 kilometers railway project of High Speed Rail mega project. The project cost is expected to be RM58 million. Below is the optimal capital structure of Empire as at 30 June 2020: 5% Debentures 7% Preferred shares Ordinary shares at par value RM1.00 Retained earnings RM 19,300,000 12,700,000 47,500,000 20,500,000 100,000,000 Empire plans to use various internal and external sources of financing to fund the project and has estimated the individual cost of capital as follows: i. Pre-tax cost of debt is 5.35% ii. Cost of preference shares is 6.5% iii. Cost of internal and external equity is 19.8% and 20.5% respectively Empire decides to limit its retained earnings available for re-investment purposes to the maximum value of 85% on retained earnings balance as at 30 June 2020. The corporate tax rate is 24%. Required: Suggest the appropriate weighted average cost of capital (WACC) if Empire agreed to undertake the railway project