a). Compute the current value of a share of common stock of a company whose most...

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Finance

a). Compute the current value of a share of common stock of acompany whose most recent dividend was RM2.50 and is expected togrow 3% per year for the next 5 years, after which the dividendgrowth rate will increase to 6% per year indefinitely. Assume 10%required rate of return.
b).You are considering to purchase the stock of Tambunan TeaBhd. You expect it to pay a dividend of RM3 in 1 year, RM4.25 in 2years and RM6.00 in 3 years. You expect to sell the stock for RM100in 3 years. If your required of return for the stock is 12%, howmuch would you pay for the stock today?
c). A firm owns a building with a book value of RM 150,000 and amarket value of RM250,000. If the building is utilized for aproject, what would be the opportunity cost (ignore the taxes).Explain your answer.
d). The cost of a new machine is RM250,000. The machine has a3-year life and zero salvage value. If the cash flow each year isequal to 40% of the cost of the machine, calculate the paybackperiod for the project.
e). Luanti Corp. is considering investing in a new project. Theproject will need an initial investment of RM2,400,000 and willgenerate RM1,500,000(before tax) cash flows for three years. If thetax rate is 20%, calculate the IRR for the project.

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4.2 Ratings (778 Votes)

a Current value of a share is computed as follows Dividend at end of year 1 RM 250 3 RM 2575 Dividend at end of year 2 RM 2575 3 RM 2652 Approximately Dividend at end of year 3 RM 2652 3 RM 2732 Approximately Dividend at end of year 4 RM 2732 3 RM 2814 Approximately Dividend at end of year 5 RM 2814 3 RM 2898 Approximately Dividend at end of year 6 RM 2898 3 RM 3072 Approximately D1 1101 D2 1102 D3 1103 D4 1104 D5 1105 1 1105 D6 required rate of return growth rate By plugging the figures in the above mentioned See Answer

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