You were given the following data regarding AKU : Total equity =100,000,000$ Total debt =50,000,000 After tax interest on debt =6% per annum Beta =1.6 Current market price =$10/ share Expected selling price next year =$10.50/ share Expected dividend next year =$0.42/ share You have also found out from the website that the interest rate for Treasury Bill is 2.5%, and average market return is 7.5% Required: a) What is the market risk premium? (1 mark) b) What is the required return for AKU? What is the expected return for AKU? Will you invest in shares of AKU? Why? (8 marks) c) What is the weighted average cost of capital (WACC) for AK? (3 marks) d) AKU has decided to increase its debt to RM100,000,00 by taking a loan at after-tax interest rate of 8%. What is the WACC after this change? Should AK proceed with this change? Why? (9 marks) e) AKU has decided to proceed with this RM50,000,000 loan. Out of this amount, RM30,000,000 will be used to pay dividend, and RM20,000,000 will be kept in bank as fixed deposit which will earn 3.5% interest while waiting for opportunities to invest in viable projects. Discuss the appropriateness and the implications of its actions. (9 marks)