Reference no: EM133005129

QUESTION -

a. Kucai Bhd is expected to pay a dividend of RM1.20 per share at the end of the year. The stock sells for RM25 per share, and its required rate of return is 15%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate of that company?

b. Pop IT Bhd is rapidly growing and has an abnormal dividend policy. The dividends are expected to grow at a 22% for the next 3 years, with the growth rate falling off to a constant at 8% thereafter. The required return is 12% and the company just paid a 3.80 annual dividend. What is the current share price?

c. Orkid Bhd has two bond issues outstanding, and both sell for RM551.83. The first issue has an annual coupon rate of 6 percent and 20 years to maturity. The second has an identical yield to maturity as the first bond, but only 8 years until maturity. Both issues pay interest annually. What is the annual interest payment on the second issue? Round up to the nearest 1.

d. Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 8%. The bond has a face value of RM100, and it makes semiannual interest payments. If you require an 12% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?