QUESTION 4 Starlight Sdn Bhd is a levered firm. The following is the extract of the financial statement of this firm: Total Assets RM'000 2,500 Total Equity Total Debt RM'000 2,000 500 2,500 2,500 Earnings before interest is RM250,000. Total debt of RM500,000 represent the debentures issued at interest rate of 8% per annum. Required: Calculate the cost of equity for the Starlight Sdn Bhd. Assume the firm operates in a tax-free environment (3 marks) QUESTION 5 Seroja Sdn Bhd is an interior design firm. It is currently all-equity financed firm. The cost of equity for this firm is 8%. This firm intends to undertake a new project costing RM500,000. If the project is executed, it is expected that the earnings before interest and tax (EBIT) will increase to RM275,000 per year in perpetuity. The corporate tax rate is 25%. Required: If 6% Debentures is to be issued to finance the project, calculate: i. The value of the firm (2 marks) ii. The overall cost of equity (Rwacc) (2 marks)