Question: Project A Required Investment = RM40 ROIC = 16% Project B Required Investment= RM40 ROIC =13.50% Project C Required Investment= RM20 ROIC =13% Total Investment

Project A Required Investment = RM40 ROIC = 16% Project B Required Investment= RM40 ROIC =13.50% Project C Required Investment= RM20 ROIC =13% Total Investment Required Investment= RM100

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. a. What is the calculation formula to calculate the amount of the first stage financing using the intended capital structure and that the company needs to pay the dividends payment.

b. What is the calculation formula to calculatethe leverage beta at the first stage of financing? c. What is the calculation formula to calculate the cost of equity at the first stage of financing? d. What is the calculation formula to calculate the cost of equity after the first stage of financing? e. What is the calculation formula to calculate the Weighted Average Cost of Capital at the first financing stage and the second financing stage?

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