QUESTION 2 Naruto Bakery has a capital structure consisting of: 42,000 issued and paid-up ordinary shares RM105,000 5,000 issued and paid-up 10% Preference shares RM15,000 8% Bonds (10-year maturity) RM30,000 The balance of retained earning as at 1 January 2021 was RM75,000. The market price per unit of the company’s financial instruments are as follows: Ordinary shares : RM2.50 (last dividend paid was RM0.50; growth rate is 5% Preference shares : RM3.00 8% Bonds : RM890.00 (par value RM1,000)
QUESTION 2
Naruto Bakery has a capital structure consisting of:
42,000 issued and paid-up ordinary shares RM105,000
5,000 issued and paid-up 10% Preference shares RM15,000
8% Bonds (10-year maturity) RM30,000
The balance of retained earning as at 1 January 2021 was RM75,000. The market price
per unit of the company’s financial instruments are as follows:
Ordinary shares : RM2.50 (last dividend paid was RM0.50; growth rate is 5%
Preference shares : RM3.00
8% Bonds : RM890.00 (par value RM1,000)
The company is considering to invest in new project worth RM80,000. The floatation
cost to sell more shares and bonds are 5%. The corporate tax rate 25%.
You are required to calculate (show all workings):
b. The company’s cost of debt,
issuance of ordinary shares.
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