Question 4

The following data relates to Rasa Sayang Bhd : The Balance Sheet extract of the company as at 31 December 2021: RM

Capital and Reserve Ordinary Shares at RM1.00 per share 600,000

8% Preference Shares at RM1.00 per share 200,000

Reserves 800,000 1,600,000

Non Current Liabilities

6% Loan Stock (matures on 31 December 2023) 500,000

2,100,000

Notes:

Current ordinary share price (ex-div) RM1.50.

Current ordinary dividend per share just paid RM0.10.

Expected annual ordinary dividend growth rate 3%.

Current preference share price (cum div) RM1.10.

Loan stock is quoted at RM80 per RM100.

Corporate tax rate at 30%

Required :

(a)Calculate the following:-

i. Cost of equity ii. Cost of redeemable loan stock

ii. Cost of preference shares for Rasa Sayang Bhd.

(b)Calculate the WACC for Rasa Sayang Bhd (You may use the market value for weighting)