2. (a) Emilia is the Financial Analyst at Megah Jaya Company. She is considering two investment...

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2. (a) Emilia is the Financial Analyst at Megah Jaya Company. She is considering two investment alternatives. The following information is given: Alternative Par value Coupon interest Maturity Market Price Generation Bonds RM1,000 6 percent (semiannually) 5 years RM980 Descent Bonds RM1,000 6 percent (annually) 10 years RM1,050 Compute value of bond (Vb) for each investment alternative and decide which of investment alternative that should she choose. Megah Jaya Company's required rate of return is 12 percent. (10 marks) (b) Tilagam Textiles Berhad wishes to issue new bonds but currently the market would set the yield to maturity. The bonds would be 20 years maturity, 7 percent coupon bonds with a RM1,000 par value. Tilagam has determined these bonds would sell for RM1,050 each. Calculate Yield to Maturity (YTM) for these bonds. (9 marks) (c) Zafril Berhad has issue preferred share at RM100 per share which pays a constant dividend of RM7 per share and required rate of return is 9 percent. Calculate the value of preferred share. (2 marks) (d) Zigzag Company paid dividend RM2 per share for their common share last year. The dividend expected to grow steadily at 8 percent and required rate of return is 16 percent. Calculate the current market price for the share. (4 marks) 2. (a) Emilia is the Financial Analyst at Megah Jaya Company. She is considering two investment alternatives. The following information is given: Alternative Par value Coupon interest Maturity Market Price Generation Bonds RM1,000 6 percent (semiannually) 5 years RM980 Descent Bonds RM1,000 6 percent (annually) 10 years RM1,050 Compute value of bond (Vb) for each investment alternative and decide which of investment alternative that should she choose. Megah Jaya Company's required rate of return is 12 percent. (10 marks) (b) Tilagam Textiles Berhad wishes to issue new bonds but currently the market would set the yield to maturity. The bonds would be 20 years maturity, 7 percent coupon bonds with a RM1,000 par value. Tilagam has determined these bonds would sell for RM1,050 each. Calculate Yield to Maturity (YTM) for these bonds. (9 marks) (c) Zafril Berhad has issue preferred share at RM100 per share which pays a constant dividend of RM7 per share and required rate of return is 9 percent. Calculate the value of preferred share. (2 marks) (d) Zigzag Company paid dividend RM2 per share for their common share last year. The dividend expected to grow steadily at 8 percent and required rate of return is 16 percent. Calculate the current market price for the share. (4 marks)

Answer rating: 100% (QA)

Investment Analysis and Bond Valuation a Megah Jaya Investment Recommendation Generation Bonds Face Value Par Value RM1000 Coupon Rate 6 semiannually ... View the full answer