The target capital structure is to use 50% Debt and 50% Equity. Net Income last year was RM40 and the company intends to pay dividends to the amount of RM10. The interest rate that banks will charge for any amount of loans is 8%. The Corporate Tax Rate is 30%. Fixed deposits rates in the market is currently 3%. This rate is considered risk free (RF). The stock market is forecasted to provide a return of 15% which will be used as the required return from the market. The unlevered beta for the company is 0.8. Any new shares issue will be charge a 3% flotation cost.

Part F -

Cost of capital=9.1%

This is minimum required rate of return.

Any project having return more than this can be accepted.

Now each of project having ROIC greater than cost of capital

so all projects can be accepted.

Yes each of project A,B and C all can be accepted.

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Based on the answer in part f, what is the total amount of investment

\begin{tabular}{|l|c|c|} \hline & Required Investment RM & ROIC \\ \hline Project . & 40 & 16% \\ \hline Project B & 40 & 13.50% \\ \hline Project C & 20 & 13% \\ \hline Total Investment & 100 & \\ \hline \end{tabular}