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Q1. (a) Ardent Berhad has the following cost for each of its capital resources; pre-tax cost of debt is 5.5%, cost of preference shares is 7%, cost of retained earnings is 10% and cost of new ordinary shares is 12%. The companys capital structure consists of 35% bond, 10% preference shares, and 55% equity. The applicable tax rate is 30%. (Note: Round your final answer to 4 decimal places)

(i) Compute the companys weighted average cost of capital (WACC) if Ardent chooses to use its retained earnings. (3 marks)

(ii) Compute the companys weighted average cost of capital (WACC) if Ardent chooses to issue new ordinary shares. (3 marks)

(iii) In which case will the companys weighted average cost of capital (WACC) become lower? By using its retained earnings or by issuing new ordinary shares? Why? (5 marks)

(iv) Explain why cost of debt is the lowest among the companys capital resources. (3 marks)