Question: TOPIC: CAPITAL STRUCTURE 1. JULY2020:Q4 Starlight Sdn Bhd is a levered firm. The following is the extract of the financial statement of this firm: RM'000

TOPIC: CAPITAL STRUCTURE

TOPIC: CAPITAL STRUCTURE 1. JULY2020:Q4 Starlight Sdn Bhd is a levered firm.

1. JULY2020:Q4 Starlight Sdn Bhd is a levered firm. The following is the extract of the financial statement of this firm: RM'000 RM'000 Total Equity 2,000 Total Assets 2,500 Total Debt 500 2,500 2,500 Earnings before interest is RM250,000. Total debt of RM500,000 represent the debentures issued at interest rate of 8% per annum. Required: Calculate the cost of equity for the Starlight Sdn Bhd. Assume the firm operates in a tax-free environment

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