QUESTION 1 CCM Bhd is a company operating in the Industrial Products and Services sector in...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
QUESTION 1 CCM Bhd is a company operating in the Industrial Products and Services sector in Malaysia. It has been in existence for more than 15 years and has a record of paying dividends for the past years. The dividend payout ratio (DPR) has been at a constant rate of 40% since 2015. The company is expected to maintain a constant dividend payout ratio and a constant rate of earnings until perpetuity. A. B. CCM Bhd's Earnings per share for the current year is RM2 per share. Its return on equity (ROE) is expected to remain at 10% in the future and the required returns on similar risk investment is at 14%. Note: g = ROE (1-DPR) Required: i. ii. iii. CCM Bhd's share is currently trading at RM9 per share. Your uncle, Mr AZ is interested to invest in the share market and wonder whether the CCM's share is worth buying. Analyze the above information to find out whether the share is correctly priced and worth buying. CCM Bhd is considering to undertake an aggressive financial strategy that will be tabled in the upcoming Annual General Meeting. With the new strategy, it is expected that CCM Bhd's dividend to grow rapidly over the next 3 years at a rate of 10% per annum. Subsequently, the dividend will grow at a consistent rate of 12% for a foreseeable future. Evaluate the expected value of CCM Bhd's share if the new strategy is undertaken. Explain the effect of an increased in investor's required rate of return on the value of the company's share. No calculation is needed. After 10 years in the industry, Delaila Sdn Bhd seems to be ready to expand their business to a bigger scale. For that purpose, they need to find a larger capital and has decided to float their share in the stock market. They understand about the requirements of Initial Public Offering (IPO) and ready to hire good underwriter to develop an attractive prospectus. However, the top management of Delaila Sdn Bhd still confused with the two methods of obtaining quotation on the stock market which are public offering and private placement. Required: Advise the top management of Delaila Sdn Bhd on how public offer for sale and private placement could help them to get the needed capital. QUESTION 1 CCM Bhd is a company operating in the Industrial Products and Services sector in Malaysia. It has been in existence for more than 15 years and has a record of paying dividends for the past years. The dividend payout ratio (DPR) has been at a constant rate of 40% since 2015. The company is expected to maintain a constant dividend payout ratio and a constant rate of earnings until perpetuity. A. B. CCM Bhd's Earnings per share for the current year is RM2 per share. Its return on equity (ROE) is expected to remain at 10% in the future and the required returns on similar risk investment is at 14%. Note: g = ROE (1-DPR) Required: i. ii. iii. CCM Bhd's share is currently trading at RM9 per share. Your uncle, Mr AZ is interested to invest in the share market and wonder whether the CCM's share is worth buying. Analyze the above information to find out whether the share is correctly priced and worth buying. CCM Bhd is considering to undertake an aggressive financial strategy that will be tabled in the upcoming Annual General Meeting. With the new strategy, it is expected that CCM Bhd's dividend to grow rapidly over the next 3 years at a rate of 10% per annum. Subsequently, the dividend will grow at a consistent rate of 12% for a foreseeable future. Evaluate the expected value of CCM Bhd's share if the new strategy is undertaken. Explain the effect of an increased in investor's required rate of return on the value of the company's share. No calculation is needed. After 10 years in the industry, Delaila Sdn Bhd seems to be ready to expand their business to a bigger scale. For that purpose, they need to find a larger capital and has decided to float their share in the stock market. They understand about the requirements of Initial Public Offering (IPO) and ready to hire good underwriter to develop an attractive prospectus. However, the top management of Delaila Sdn Bhd still confused with the two methods of obtaining quotation on the stock market which are public offering and private placement. Required: Advise the top management of Delaila Sdn Bhd on how public offer for sale and private placement could help them to get the needed capital.
Expert Answer:
Answer rating: 100% (QA)
A CCM Bhd Share Valuation and New Strategy i Current Share Price Analysis Using the constant growth dividend discount model DDMwe can analyze if the c... View the full answer
Related Book For
Intermediate Accounting Volume 2
ISBN: 9781260881240
8th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel
Posted Date:
Students also viewed these finance questions
-
Ariff was looking for suitable investment to be invested. After went through discussion with his broker, he found that there are two most attractive stocks which were Reino Bhd and Seino Bhd. Both...
-
Match the following ratios with the appropriate formula. Ratio or Rate Formula a. Income from operations Interest expense Acid-test Total liabilities Stockholders' equity Current b. Net income-...
-
For the year ending April 30, Urology Medical Services Co. mistakenly omitted adjusting entries for (1) $1,400 of supplies that were used, (2) unearned revenue of $6,600 that was earned, and (3)...
-
The WONDER database, maintained by the Centers for Disease Control and Prevention, provides a single point of access to a wide variety of reports and numeric public health data. From that database,...
-
Canadian Broadcasting Corporation (CBC) journalist Stephen Smart didnt anticipate that getting married would get him in hot water with his employer. However, Smart, a reporter in the British Columbia...
-
On January 1, 2014, the ledger of Zaur Company contains the following liability accounts. Accounts Payable .......... $42,500 Sales Taxes Payable ......... 5,800 Unearned Service Revenue ..........
-
The following information is available for Tamarisk Company. Raw materials inventory Work in process inventory Materials purchased in April $94,400 Direct labor in April 76,800 Manufacturing overhead...
-
If two moles of CH 3 Br reacts with three moles of I - how much heat energy is involved in the reaction? a) 19 kJ b) 76 kJ c) 114 kJ d) 38 kJ
-
You have $15,250 you want to invest for the next 38 years. You are offered an investment plan that will pay you 7 percent per year for the next 19 years and 11 percent per year for the last 19 years....
-
follow the instructions that are uploaded. try ( ) { // establish connection to database Connection connection = DriverManager.getConnection ( url, user: username, password); // create Statement for...
-
Solve lim x )] 2 4r 5
-
What is the ouput in the correct format below the question that is posted an example of how the out out should look like. The second picture is an example of how the output is suppose to look like...
-
You have just made your first $5,000 contribution to your individual retirement account. Assume you earn a 11.25 percent rate of return and make no additional contributions. Requirement 1: What will...
-
Q.3 A differential manometer is used to measure pressure difference between two fluid systems. Two parallel pipes carrying freshwater and seawater are connected to each other by a double u-tube...
-
Explain the regulation of the secretions of the small intestine.
-
Jabba Inc. is looking to establish a post-employment benefit plan for its employees. The company has decided on the following structure for its plan. A contributory defined benefit plan. The plan...
-
At the end of 20X6, the records of Security Systems Corp. showed the following: Required: Compute basic EPS. Show computations. Bonds payable, 9%, nonconvertible Preferred shares: Class A, no-par,...
-
Soccer Inc. (SI) is a public corporation incorporated in 20X2. SI operates a professional soccer team and related activities. New bank financing was obtained in 20X9 for the construction of a new...
-
The following information is available for McKee Corporation for 2015. 1. Excess of tax depreciation over book depreciation, 40,000. This 40,000 difference will reverse equally over the years...
-
In 2015, Amirante Corporation had pretax financial income of $168,000 and taxable income of $120,000. The difference is due to the use of different depreciation methods for tax and accounting...
-
Brennan Corporation began 2015 with a $90,000 balance in the Deferred Tax Liability account. At the end of 2015, the related cumulative temporary difference amounts to $350,000, and it will reverse...
Study smarter with the SolutionInn App