with higher risk level will also have a higher cost of debt.
Figure 1: Digi's Loans and Borrowings Data to take the proportion of debt
31
“Cost of Debt,” Investopedia, accessed May 2, 2019,

A table below will show and estimate how the proportion of debt is calculated from
Digi’s Annual Report
Amount
Interest Rate
(%)
Interest
Expense
Proportion of
Debt
NON - CURRENT
Floating Rate
Term Loans
1,180,674
5%
59033.7
0.05
Floating Rate
Financing
430945
5%
21547.25
0.05
Medium Term
Notes
898983
5%
44949.15
0.05
Finance Lease
Obligation
2081
9%
187.29
0.09
CURRENT
Floating Rate
Term Loans
112500
5%
5625
0.05
Floating Rate
Financing
62500
5%
3125
0.05
Finance Lease
6371
9%
573.39
0.09

Obligation
TOTAL
2694054
135040.78
0.0501
The total cost of debt is equivalent to 0.0501 (or 5.01), where this can already be
applied in the Cost of Debt formula and where the Appendix 3c) can simply show
how the Malaysian Government tax rate has a standard tax rate of 24%. Therefore, the
cost of Debt can now be calculated in the formula expressed below;
R
d
×
(
1
−
Tax Rate
)
5.01
×
(
1
−
24%
)
¿
3.8076
3.5 WACC (Weighted Average Cost of Capital)
32
The weighted average cost of capital is a tool used by financial managers when it
comes to capital budgeting and analysis of business valuation, moreover this tool is
basically the highlight in financial management courses. The formula of WACC is
expressed in the following below;
WACC
=
w
e
R
e
+
w
d
R
d
(
1
−
tc
)
Wherein; We = The Equity’s Weight
Wd = The Debt’s Weight
Tc = Tax Rate
As a conclusion based on the CAPM vs DGM model comparison and analysis, DGM
will be used to determine the cost of equity.
33
The formula would include the
following variables, number of outstanding shares (7,775,000,000 units), closing
share price as at 31 December 2018 (RM 4.50), Debt Value (RM2,512,683,000). To
determine WACC completely, elements of
w
e
and
w
d
needs to be estimated.
Digi’s annual report has shown that.
32
Sam G. Berry, Iordanis Karagiannidis, Carl Betterton, “Understanding Weighted Average Cost of Capital: A Pedagogical
Application,”
Journal of Financial Education,
ication
33
“Share Development and Analysis,” Digi Annual Report 2018, accessed May 3, 2019,

w
e
=
RM
4.50
×
7,775,000,000
(
RM
4.50
X
7,775,000,000
)
+
RM
2,512,683,000
=0.9329 or 93.3%
w
d
=
2,512,683,000
(
RM
4.50
×
7,775,000,000
)
+
2,512,683,000
= 0.0669 or 6.70%
The value of WACC is to be determined according the cost of equity through DGM,
where
r
e
=
6.27%
WACC
=
0.933
×
6.27%
+
0.067
×
5.01
(
1
−
24 %
)
¿
6.11%
Using the DGM approach to calculate the WACC would have the above-mentioned
results of 6.11%
3.6 Discussion of WACC
34
The WACC is defined as the overall cost of capital of all funding sources of a
company. A company can raise its funds from either Equity, Debt, or preferred stock.
Total cost of the equity is calculated by the weighted average of these costs.
34
“Weighted Average Cost of Capital – WACC Definition,” Investopedia, accessed on May 3, 2019,

WACC can be analyzed from 2 perspectives, the investor and the company. From a
company’s perspective, it is defined as the blended cost of capital a company must
pay for using the capital of both owners and debt holders.