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Pearl White Berhad is considering fo Open with rates of returns: Project 1 2 3 4 Cost (RM) 3,000 5,000 3,000 2,000 Long term debt: Pearl White estimate that it can issue bonds that have a maturity period of 10 years with a face value of RM1,000. The coupon rate for the bonds is 10% and is sold at the price of RM950. The corporate tax is 30%. projects with the following costs and Preference Shares: The company can issue preference shares that pays a constant dividend of RM5.00 per year at RM49.00 per share. Expected Rate of Return 16.00% 15.00% 13.75% 12.50% Ordinary Shares: Currently, the ordinary shares of the company sell for RM36.00 per share. The next expected dividend is RM3.50 and the dividend is expected to grow at a constant rate of 6% per year. Source of Capital Long-term debt Preferred stock Common stock equity A firm has determined its optimal capital structure which is composed of the following sources and percentage of financing. Percentage of Financing 15% 10% 75% c) Compute the firm's cost of preferred share. Page 4/8 Required a) Describe the advantages of raising funds through combination of various sources of financing instead of using just one source of financing. (5 marks) b) Using the approximation method, compute the firm's after-tax cost of debt. - + (5 marks) (5 marks) Continued...