SECTION B (60 MARKS) There are THREE (3) questions in this section. Answer ALL questions in the answer booklet. Question 1 - Show your workings. a. TRex Berhad plans to buy a corporate bond on January 1, 2020, that will mature on January 1,2025 , with the annual coupon payment rate is \3 at a par value of RM1,000. Calculate the bond's value if the expected rate of return is \6. (2 Marks) b. What will happen to the value of the bond when the expected rate of return of \3 is greater than the coupon interest rate of \4 ? (2 Marks) c. Dino Berhad needs to raise its capital to RM50 million if it plans to expand its business. Therefore, it plans to issue 30 million shares with a market value of RM1.00 per share, and the remaining RM20 million will be debt financing through bonds. The bonds pay annual interest before tax of \6. The yield on risk-free investment is \3 per year and the market risk premium is approximately at \7 per year. The equity beta of the firm is 1.1. The firm pays taxation at an annual rate of \30. From the above information, you are required to calculate: i. the after-tax cost of debt. (2 Marks) ii. the cost of firm's equity. (3 Marks) iii. the weighted average cost of capital based on your answers in part (i) and (ii). (5 Marks) d. Tyran Berhad is planning to issue new shares to expand its business. The price of a share is RM10.00. Due to the new issuance, there will be a RM1.20 of flotation cost incurred for each share. The company paid a dividend at RM1.00 for each share last year. It is expected to grow at \7. Based on the information, calculate the cost of capital for Tyran Berhad. (6 Marks) (Total: 20 Marks)