QUESTION 1 (25 Marks)

(a) The finance manager goal should focus on creating the firms value which maximizes the shareholders wealth rather than on profit maximization. Discuss why maximizing the shareholders wealth is a better goal than profit maximization?

(10 marks)

(b) Yusha wishes to invest RM4, 000 for one year in a savings account paying 4% interest compounded quarterly. What is the future value of Yushas investment?

(5 marks)

(c) Faizal intends to buy a new car, the Myvi for RM57,650, but only has RM20,000 in cash. How many years will it take for RM20,000 to grow to RM57,650 if it is invested at 10% interest compounded annually.

(5 marks)

(d) Monsters Berhad is a utility company that recently paid a common stock dividend of RM2.35 per share. Determine the current price of a share of Monsters common stock if its dividend growth rate is expected to remain at 7 percent per year indefinitely and its equity cost of capital is 12 percent.

(5 marks)

QUESTION 2 (25 Marks)

3. A project requires an initial investment of RM225,000 and is expected to generate the following net cash inflows:

Year

1

2

3

4

Cash inflows

RM95,000

RM80,000

RM60,000

RM55,000

a) Compute net present value (NPV) of the project if the minimum desired rate of return is 12%.

(15 marks)

b) Calculate the accounting rate of return (ARR) of the project assuming the minimum desired rate of return is 12%.

(10 marks)