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1) ZAR Electronics Sdn. Bhd. has made the following forecast for the upcoming year based on the company's current capitalization:

Interest expense RM1,000,000

Operating income (EBIT) RM 10,000,000

Earnings per share RM 3.60

The company has RM10 million worth of debt outstanding and all of its debt yields 10 percent. The company's tax rate is 26 percent. The company's price earnings (P/E) ratio has traditionally been 12x The company's investment bankers have suggested that the company recapitalize. Their suggestion is to issue enough new bonds at a yield of 10 percent to repurchase 1 million shares of common stock. Assume that the stock can be repurchased at today's RM30 stock price. Assume that the repurchase will have no effect on the company's operating income; however, the repurchase will increase the company's dollar interest expense. Also, assume that as a result of the increased financial risk the company's price earnings (P/E) ratio will be 11 after the repurchase.

Required: a) Calculate the net income before the recapitalization.

b) How many shares are currently outstanding?

c) What would be the expected year-end stock price if the company proceeded with the recapitalization? Should ZAR Electronics proceed with the recapitalization?

2) Huawei Berhad has RM12 million in Inventory and RM4 million in accounts receivable. Its average daily sales are RM200,000. The company's payables deferral period (accounts payable divided by daily purchases) is 45 days. What is the length of the company's cash conversion cycle?

Required:

Calculate the length of the company's cash conversion cycle.