# Compute the cost for the following sources of financing for Moha & Zatul Associates Berhad. a. Moha

## Question:

Compute the cost for the following sources of financing for Moha & Zatul Associates Berhad.

a. Moha & Zatul Associates Berhad has debt outstanding, and its pre-tax cost of debt is 9% and the corporate tax rate is 20%. What is after—tax cost of debt? (2 Marks)

b If Moha & Zatul Associates Berhad beta is 1.2, the risk-free rate is 9% and the market risk premium is 3%. Calculate the company cost of common shares? (2 Marks)

C. Moha & Zatul Associates Berhad issue perpetual preferred stock at a price of RM47.50 a share. The issue is expected to pay a constant annual dividend of RM3.80 a share. What is the company's cost of preferred stock? (2 Marks)

d. Moha & Zatul Associates Berhad operation’s is financed by equity at RM170,000, RM30,000 with debt and RM20 000 preferred stocks. Using your calculation in part (a), (b) and (c), compute the company weighted average cost of capital (WACC). (4.5 Marks)

e. Moha & Zatul Associates Berhad is considering a project that will bring a rate of return of 12%. Should the company proceed with this project? Explain your answer. (2 Marks)

**Related Book For**

## Fundamentals Of Corporate Finance

ISBN: 9780135811603

5th Edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford