1.

J-BON Company has a capital structure that consists of 30 percent debt, 50 percent
common equity, and 20 percent preferred stock. The common stock has a beta of 0.8. The risk-free
rate is 6 percent and the market risk premium is 7 percent. The company expects to have net income
during the coming year of RM160,000. From those income 50 percent are distributed to each of
40,000 shareholders as dividend. The company's common stock is currently selling for RM25 per
share and there is constant growth on dividend at 5%. However it would incur a 15 percent
floatation cost if it were to sell a new share. The company also has an outstanding issues of bond
with a par value of RM1,000, paying 10 percent coupon rate (paid semi-annually) and maturity
period of 10 years. The current value of the company bond is RM1,165. The cost of preferred stock is
9 percent The Company’s tax rate is 40 percent.

Assume the company has sufficient retained earnings to fund the equity portion of its capital.

i) Calculate the company's cost of retained earnings using CAPM..

Rs = rrf + (RP)β

= 0.06 + (0.07)0.8

= 11.6%

ii) Calculate the company's cost of newly issued common share.

D1= 50% x RM160K=RM80k...80k/40k stock = RM2

Rs = (D1/P0(1-F)) + g

= (2.00/25(1-0.15)) +0.05

= 14.41%

iii) Kirakan kos hutang syarikat .

3.FV = 1000;PV=1165;PMT=50((10%/2X1000));n=10X2 ; YTM =7.61% (3.807 X 2)

Rdat = rdbt (1-T)

= 0.0761(1-0.4)

= 0.0457 / 4.57%

iv) Kirakan purata wajaran modal syarikat (WACC) .

WACC = (0.3 (0.0457)) + (0.2 (0.09) + (0.5(0.116)

= 8.97%