QUESTION 5 a) Extrabig Corporation needs RM30 million for its new project. The corporation can decide to obtain funds either through the following sources: i) Issue 8% bonds with 11 years maturity at a price of RM972. The underwriting fee will be 9% of the selling price. Par value per bond is RM1000; or ii) Issue preferred stock at RM17 and pays a RM1.75 dividend. The net price of the stock after issuance costs is RM15.30; or iii) Issue new common stock at a market price of RM22. Dividends last year were RM1.15 per share and are expected to grow at a rate of 7%. Flotation costs will be 5% of the market price. If tax rate is 30%, which source of fund is the best for Extrabig Corporation? (12 marks) b) Utama Corporation is planning to issue RM1 million in 180-day maturity notes carrying a rate of 12% per annum. Due to the size of this firm, its commercial paper will be placed at a cost of RM3,000. What is the effective cost of credit to Utama Corporation? (4 marks)