Question 3 [Total 35 marks] a) PTL Bhd has issued 5 million ordinary shares, with a market price of RM9 each. The company has RM1 million of irredeemable 13% debentures in issue, with a market price of RM85 per RM100 nominal value. It also has issued 500,000 preference shares at 15%, with a nominal value per share of RM1, and with a market value of RM1.45. The tax rate is 25% per annum. Recently, the company has recorded its current earnings of RM1.5 million, and paid dividends in the past years as below: 2016: RM0.60 2017: RM0.90 2018: RM1.00 2019: RM0.85 2020: RM0.70 Required: Using the information given above, calculate the weighted average cost of capital of PTL Bhd. (14 marks) b) Explain pecking order theory and discuss how the theory can inform good firms in financing their investment compared to bad firms. (11 marks) c) SCL Bhd is a company specialising in the financial consultancy services. The company was incorporated in 2012 and currently has five consultancy firms nationwide in Malaysia. Based on the analysis obtained, the financial services sector will grow by more than 10% over the next six years. The company is keen to take advantage of the high growth rate projected and opportunities for business expansion. Recently, the CEO has conducted few strategic meetings to consider seeking funds to finance the firm's expansion plan. Since the company is 'highly geared', its financial analysts and advisors have suggested that it should seek to raise funds through share issue, rather than loan. Required: Explain the term "highly geared" and its implications to SCL Bhd when raising additional funds. (10 marks)