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Serba Baharu Bhd. has the following capital structure: Dividends on common shares are currently at RM4 per share and are expected to grow at a
Serba Baharu Bhd. has the following capital structure: Dividends on common shares are currently at RM4 per share and are expected to grow at a constant rate of 6%. Market share price of a common share is RM40, and the preference shares of RM1 are currently selling at RM50 each. Flotation cost for new issues of common shares is 10% of the share price. The company's tax rate is 30%. Required: (i) Calculate the cost of the 8% bond. (ii) Calculate the cost of the 5% preference share. (iii) Calculate the cost of retained eamings. (iv) Calculate the cost of a new common share. (v) Calculate the weighted average cost of capital. ( 3 marks) (ivarks)
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