1. Asia Bank has a current share price of RM38.00 and current dividend of Rm1.50. The dividend is expected to grow at 6 percent annually. The company’s beta is 1.1. The risk- free interest is 4 percent and the market premium is 6 percent.

1. Calculate Asia Bank’s next year projected dividend.

2. Calculate Asia Bank’s required rate of return based on the CAPM method.

3. Using the Gordon growth model, calculate the value of Asia Bank share.

Assuming the Gordon growth model is valid, calculate the dividend growth rate that would result in a model value of Asia Bank equal to its market price.

Answer rating: 100% (QA)

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