Southern Mart operates a very successful chain of sport shop in Malaysia. The company needs to raise funds for its planned expansion into the Northern Part of Malaysia. The firm's balance sheet at the close of 2021 appeared as follows:

Southern Mart operates a very successful chain of sport shop in Malaysia. The company needs to raise funds for its planned expansion into the Northern Part of Malaysia. The firm's balance sheet at the close of 2021 appeared as follows: Cash RM2,010,000 Long-term Accounts Debt RM 8,141,000 Receivable 4,580,000 Common Inventories 1,540,000 Equity 32,564,000 Net Plant and Equipment 32,575,000 Total Debt Total Assets RM40,705,000 and Equity RM40,705,000 The company's management estimates that the market requires 15 percent return on its common stock, the firm's bonds command a yield to maturity of 7.5 percent, and the firm faces a tax rate of 30 percent. At the end of the previous year Northern Mart's common stock was selling for a price 1.5 times its book value, and its bonds were trading near their par value. a. Explain the current capital structure of Southern Mart. (6 Marks) b. Calculate the cost of capital for Southern Mart. (6 Marks) c. If Southern Mart stock price were to fall 0.8 times book value and the cost of equity fell to 12.5 percent, calculate the firm's weighted average cost of capital (assume the cost of debt and tax rate do not change). (8 Marks)