FINAL EXAM NOVEMBER $2022(20$ MARKS$)$

Bliz Blue Berhad has issued $200$ millions shares $5$ years ago at RM$4\mathrm{.}20$ per share. $20\%$ of its shareholders are the preferred stockholders. Currently, the firm market price for its common stock is RM$12\mathrm{.}35$ per share and the preferred stock is RM$7\mathrm{.}65$ per share. The firm beta currently is $1\mathrm{.}5$ while the risk$-$free rate which is the MGS $($Malaysia Goverment securities$)$ rate is presently at $3\mathrm{.}5\%$ and the market return on expected portfolio is $7\mathrm{.}5\%.$ The required rate of return for preferred stock is $7\%.$

The firm recently paid the dividend for its common stockholder at RM$2\mathrm{.}50$ per share while for preffered stock holder is RM$2\mathrm{.}00$ per share. The firm plan to change its current growth rate from $20\%$ for the next two years to $12\%$ in Year $3$ and Year $4.$ The growth rate will shrink to $8\%$ in Year $5$ and thereafter.

The firm has invested in CIMB and Digi shares. Currently, CIMB market price is RM$5\mathrm{.}66$ and its beta shows at $1\mathrm{.}4$ and the market risk premium is $7\%.$ Digi currently market value is RM$3\mathrm{.}87$ with a beta of $0\mathrm{.}9$ and the expected market return for the telco industry is $7\mathrm{.}8\%.$ CIMB is expected to pay dividend of RM$0\mathrm{.}50$ per share with the growth rate of $4\%.$ Digi has recently paid its dividend of RM$0\mathrm{.}05$ per share with expected dividend growth rate of $5\%.$

Required:

a$.$ What is the value of Bliz Blue common stock and preferred stock? Evaluate both stocks.

$(6$ marks$)$

$($CLO$3$:PLO$7$:C$5)$

ANSWER: k$=9\mathrm{.}5\%$; Po common stock $=$ RM$85\mathrm{.}25$; Po preferred stock $=$ RM$28\mathrm{.}57$

b$.$ What is the value of CIMB and Digi? Evaluate both stocks.

$(6$ marks$)$

$($CLO$3$:PLO$7$:C$5)$

ANSWER: CIMB Po$=$RM$0\mathrm{.}44$; Digi Po$=$RM$0\mathrm{.}049$

c$.$ What is the expected price for CIMB after $3$ years? What is the dividend for Digi in year $2$ and year $3?$

$(3$ marks$)$

$($CLO$3$:PLO$7$:C$5)$

ANSWER: CIMB P$3=$RM$6\mathrm{.}37$; Digi D$2=$RM$0\mathrm{.}56$; D$3=$RM$0\mathrm{.}58$

d$.$ What is beta and what is the market beta? Explain the beta for Bliz Blue, CIMB and Digi and its riskiness.

kindly provide answers according to the mark