QUESTION 3 (25 marks) a) Syarikat Jati has been very successful in the past four years.

Over these years, it paid common stock dividend of RM4 in the first year, RM4.20 in the second year, RM4.41 in the third year, and its most recent dividend was RM4.63. The company wishes to continue this dividend growth indefinitely. What is the value of the companys stock if the required rate of return is 12 percent? (5 marks) Solve the value of a share of common stock of a company whose most recent dividend was RM2.50 and is expected to grow at 3 percent per year for the next 5 years, after which the dividend growth rate will increase to 6 percent per year indefinitely. Assume 10 percent required rate of return. (5 marks) Prove that the value of an asset which pays RM200 a year for the next 5 years and can be sold for RM1,500 at the end of five years from now, is RM1,689.70. Assume that the opportunity cost is 10 percent. (5 marks) To expand its business, the Kuah Outlet factory would like to issue a bond with par value of RM1,000, coupon rate of 10 percent, and maturity of 10 years from now. Show the value of the bond if the required rate of return is 1) 8 percent, 2) 10 percent, and 3) 12 percent? (5 marks) On January 1, 2014, Thong Corporation will issue new bonds to finance its expansion plans. In its efforts to price the issue, Thong Corporation has identified a company of similar risk with an outstanding bond issue that has an 8 percent coupon rate that is due January 1, 2029. This firms bonds currently are selling for RM1,091.96. If interest is paid semiannually for both bonds, determine what must the coupon rate of the new bonds be in order for the issue to sell at par? (5 marks)

b)

c)

d)

e)

QUESTION 4 (25 marks)

a) Waq Technologies Sdn Bhd writes 3 cheques a day for an average amount of RM 5,400 each. These cheques generally clear the bank 4 days after they are written. In addition, the firm generally receives and deposits cheques amounting to RM 18,700 each day. All deposits are available on the next day. What is the firm's net float? (7 marks) b) Consider the following extract financial information for WawaLisa Sdn Bhd Inventory Accounts Receivable Accounts Payable Net Sales Cost of Goods Sold RM 10,822 RM 7,301 RM 6,948 RM 146,400 RM 82,500

Assume all sales are on credit and 365 days for a year. Determine the cash cycle for WawaLisa Sdn Bhd. (11 marks) c) Explain 2 (TWO) advantages and 2(TWO) disadvantages of Just in time (JIT) Inventory Management System. (6 marks)

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