Advanced Financial Management (BWFF2043)

You offered a unit of condo with the price of RM580,000 and you can get 100% loan on that (full loan). When you check up the interest rate with the bank is 5.75% rate and it allows you to pay at the end of period for 30 years. Then, you found that the average rate of monthly rent is RM1800 and it is assumed to grow 5% every 5 years. Is the condo worth it? What is the annual payment of the housing loan? Prepare a amotization table for that 30 years loan. How much do you pay back the loan? How much have you paid in total for the interest payment. If the bank require the first payment immediately, what is the value of each payment? Draw amortization table for annuity.

a)Compare the Stable Dividend Payout to the Residual Dividend Policy. (5 marks) b)Meriah Berhad's future earnings for the next two years are predicted to be RM900,000 for the first year and RM1,200,000 for the second year. Assuming there are 500,000 shares of common stock outstanding, what will the yearly dividend per share be in Year 1 and Year 2 if the company is practicing i)a constant payout ratio of 40%? (4marks) ii)stable dividend targeted at 40% of the average earnings over the two-year period? (2 marks) iii)small, regular dividend of RM0.75 plus a year-end extra of 40% of profits exceeding RMI million? (4 marks)

b)Four years ago, Berkat Folding Box Sdn. Bhd started a 10-year useful life project by purchasing a gluing machine. Currently, the remaining project life is six years. The existing gluing machine which was purchased four years ago when the project started is originally cost RM10,000, and being depreciated under simplified straight-line method with useful life of four years and currently can be sold for RM15,000. Berkat is considering purchasing a new gluing machine. The new gluing machine costs RM40,000 and requires installation costs of RM2,000. Training costs for the employees who will operate the new machine will be a one-time cost of RM5,000. With the purchase of new machine, the revenue expected to increase by RM20,000 each year. The new machine will be depreciated under simplified straight-line method with useful life of four years. At the end of project life, the new machine is expected to be sell at RM10,000. The firm has a 12% cost of capital and a 28% tax on ordinary income and capital gains. By using the above information, calculate the i)initial outlay for this project. (4 marks) ii)annual cash flows from Year l until Year 6. (7 marks) iii)terminal cash flow of the project. (3 marks) iv)NPV of the project. (3 marks)

e)XYZ Corporation just issued some new preferred stock. The issue will pay an annual dividend of RM20 in perpetuity starting 20 years from now. If the market requires a return of 5.65% on this investment, how much will you pay for the company's preferred stock today?

c)ABC Corporation's bonds mature in 14 years and pay 7% interest annually. If you purchase the bonds for RMl,110, what is your expected rate of return? (2 marks) d)KXL just paid a dividend of RM3.15 per share. The company will increase its dividend by 20oZ»next year and then reduce its dividend growth rate by 5% per year until it reaches the industry average of 5% dividend growth, after which the company will keep a constant growth rate forever. If the required return on the company's stock is 12%, what is the stock price for today?

Too Young Company has a bond outstanding with a coupon rate of 5.34 % and semi-annual payments. The yield to maturity is 6.7 % and the bond matures in 18 years. What is the market price if the bond has a par value of RM2,000? a. RM1,718.00 b. RM1,720.64 c. RM1,722.91 d. RM1,752.36