Question 10 Below are the information of the sources of capital of Indah Niaga Bhd,...
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Question 10 Below are the information of the sources of capital of Indah Niaga Bhd, which consist of long term debt, preferred stock and common equity: A bond selling to yield 11% for the purchaser of the bond. The firm's average tax rate is 24% A new common stock issue that paid RM1.25 dividend last year. The firm's dividend per share have grown at a rate of 7% per year. The price of this stock is now RM30.50 with the flotation cost of RM0.50. A preferred stock paying 10% dividend on a RM150 par value. The preferred shares currently selling at RM175. 1. (a) Calculate firm's after tax cost of debt. 2. (b) Calculate the cost of capital for the common equity. 3. (c) Calculate the cost of capital for the preferred stock. 4. (d) If the capital structure of Indah Niaga is as following, calculate the firm's weighted average cost of capital (WACC). Sources of capital Long term debt Common stock equity Preferred stock Amount of capital RM 875,000 1,250,000 375,000 2,500,000
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