The GAMMA HOLDINGS BHD has the following capital structure, which it considers optimal: Bonds, 7% (now selling at par) RM300,000 Preferred stock, RM5.00 RM240,000 Common stock RM360,000 Retained Earnings RM300,000 TOTAL RM1,200,000 Dividends on common stock are currently RM3.00 per share and are expected to grow at a constant rate of 6 percent. The market price share of common stock is RM40 and the preferred stock is selling at RM50. The flotation cost on new issues of common stock is 10 percent. The interest on bonds is paid annually. The company's tax rate is 40 percent. Calculate: (a) the cost of bonds (b) the cost of preferred stock (c) the cost of retained earnings (or internal equity) (d) the cost of new common stock (or external equity) and (e) the weighted average cost of capital, WACC
