Figure of EPS and net income are extract from the Statement of Profit or Loss and other comprehensive income, and total equity is extract from Balance Sheet. Using DGM to calculate the cost of equity as follow: ࠵?bt࠵?uihv(1 + ࠵?)࠵?i+ ࠵?=0.129(1 + 9.53%)2.14+ 9.53%= 16.13%3.1.3 Evaluation and comparison of CAPM and DGM Calculation for cost of equity using CAPM and DGM shows the different figure. Using CAPM method, it gives -4.27% meanwhile using DGM it gives 16.13%, there is a different of 11.86%. In theory using both of these methods are correct, however in reality there is always some error or inaccurately of calculation. Reviewing both calculation, CAPM is more suitable for Berjaya Auto Berhad because Dividend Growth Model required a constant growth of dividend pay-out, and Berjaya Auto Berhad paid 4 times per year and an additional special dividend, which the amount is not consistent. However, using CAPM might not be accurate as the stock price might be misprice from time to time being, therefore, CAPM can be use just as guidance for investors but not to ensure a safe investment for investors. For risk free rate, using short-term government bond may not result in accurate figure. This is due to the change of value on daily basis and it depends on the economy day to day performance.12As for beta, the figure that was calculated might not be accurate as well, there might be uncertainty rises which will affect the beta from time to time. Therefore, the figure of beta was calculated based on estimation. CAPM and DGM is imperfect for calculating cost of equity, however in this case by theory, CAPM is suitable for calculating cost of capital.
3.2 Cost of Debt Cost of debt is how much a company need to pay for using debt to finance the company. In other words, it is the effective rate that the company have to pay for its debts. Cost of debt also act as the company tax shield when it comes to taxation. The cost of debt will reduce the taxable income of the company therefore, there will be less tax imposed to the company. To calculate cost of debt, the following formula is used: ࠵?w= ࠵?࠵?࠵? − ࠵?࠵?࠵? ࠵?࠵?࠵?࠵? ࠵?࠵? ࠵?࠵?࠵?࠵?࠵? × (1 − ࠵?࠵?࠵? ࠵?࠵?࠵?࠵?)In this case, Berjaya Auto Berhad currently did not have any interest rate bearing debts and long-term loan13as well as year 201514and year 2014.15 Therefore, it is impossible to calculate cost of debt for Berjaya Auto Berhad. 3.3 Weighted Average Cost of Capital (WACC) To calculate weighted average cost of capital, the following formula is used: ࠵?࠵?࠵?࠵? = ࠵?b࠵?b+ ࠵?w࠵?w(1 − ࠵?}) + ࠵?~࠵?~From the formula above, ࠵?bis the cost of equity, ࠵?bis the weight of equity, ࠵?wis the cost of debt, ࠵?