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Identify the cost of each financing

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Question - SoundCore Corporation needs an additional fund of RM12,000,000.00 for its expansion. Below are the alternatives financing available for the company.

Bond Issue an 11 percent bond that will mature in 20 years. The floatation cost is 10 percent of the market value which is expected to be RM920.00. The tax rate for the company is 24 percent.

Preferred shares Issue new preferred shares with 8 percent dividend. The firm's current preferred shares are currently selling for RM98.00. The net price of the security after the issuance cost is RM94.00.

Common shares Issue new common stock at RM86.00 per share with 5 percent floatation cost. The shareholders are expected to be paid RM5.50 of dividend and the dividend is expected to grow at 7 percent annually.

a. Based on the alternatives of financing above, identify:

i. the cost of each financing

ii. the best source and financing and justify your answer.

b. Discuss three (3) importance of financial markets to an organisation.

Reference no: EM132825113

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