TUTORIAL $3(50$m$-15\%)$ Nemo Technologies was founded $10$ years ago. It has been profitable for the last $5$

years, but it has needed all of its earnings to support growth and thus has never paid a

dividend. Management has indicated that it plans to pay dividend as below:

Thereafter, earnings and dividends are expected to grow at a long$-$term constant growth

rate of $8$ percent. Assume a required rate of return of $11$ percent. Calculate the current

value of the shares.

$(8$ marks$)$

YTL Berhad is experiencing a period of variable growth model. YTL Berhad paid a

dividend of RM$2\mathrm{.}20$ last year. Dividends per share are expected to grow at a rate of $15$

percent for first year, $18$ percent during the next two years and $6$ percent thereafter. If

the required rate of return on the share is $10$ percent, calculate the current value of YTL

Berhad's share.

$(5$ marks$)$

ABC Corporation recently issued $10-$year bonds at a price RM$1,000.$ These bonds pay

RM$60$ in interest each six months. Their prices have remained stable since they were

issued. Due to additional financing needs, the company wishes to issue new bonds that

would have a maturity of $10$ years and, a par value of RM$1000,$ and pay RM$40$ in interest

every six month. Compute both value of bond for ABC Corporation.i$=10\%$

$(5$ marks$)$

Calculate the required rate of return using CAPM for the following:

$($a$)$ Mega Bhd which has a beta of $0\mathrm{.}73$ when the risk free rate is $6$ percent and the

market return to be $11$ percent.

$(2$ marks$)$

$($b$)$ Lego Bhd$.$ which has a beta of $0\mathrm{.}8$ when the risk free rate is $4$ percent and the

market return to be $12$ percent.

$(2$ marks$)$

Ahmad Albab hold share Ehclair Bhd in a well$-$diversified portfolio which is the share

currently selling for RM$26\mathrm{.}50$ with a beta of $1\mathrm{.}2.$ He wishes that, expected Ehclair Bhd$\text{'}$s

share to sell for RM$28$ at the end of the next year and pay a dividend of RM$2.$ The risk$-$

free rate is $4\mathrm{.}5$ percent and the expected return on the market is $11$ percent. Decide

whether Ahmad Albab should keep hold or sell the shares. Show your calculation.

$(5$ marks$)$

Lina, a friend has given information that the share of Zip Zap Bhd is going to rise from

RM$62$ to RM$65$ per share over the next year. You know that the annual return on the

KLCI has been $10$ percent and the $90-$day MGS$-$bill rate has been yielding $6$ percent per

year over the past $10$ years. If beta for Zip Zap is $0\mathrm{.}9,$ decide whether you should

purchase the shares or not. Diandra is interested in purchasing a European call and put option on AXL Berhad, with

a strike price of RM$55$ and five year until expiration. AXL's share is currently trading

RM$59$ per share, and the volatility is $35$ percent per annum. Malaysia Treasury Bill's that

mature in five year yield a continuously compounded interest rate of $9$ percent per

annum. Calculate the price of the call option and put option by using the Black$-$Scholes

model if $d_1=1\mathrm{.}0560$ and $d_2=0\mathrm{.}2734.$

$(10$ marks$)$

CHAPTER $5$: COMPANY ANALYSIS

CHAPTER $7$: VALUATION OF SECURITIES

CHAPTER $8$: PORFOLIO MANAGEMENT

CHAPTER $10$: DERIVATIVES

INSTRUCTION:

Please answer ALL questions.

Mode: Individual $(1).$

The answer should be hand written.

Clearly state name and student id in the first page and continue with the answer.

Date of submission: IN THE CLASS $($TWO HOURS CLASS$)$

$**$ If you have any difficulties in completing the T$3$ according to the date given, please come and discuss with me before the date of the assignment$**$

Marks will be deducted for late submission. $($Total marks divide by $2).$

COURSE LEARNING OUTCOMES $($S$)$:

CO$1$ familiarize themselves with the financial markets and understand the functioning of those markets.

QUESTION $($S$)$:

Complete the following balance sheet using the information given.

$\backslash$table$[[$Balance Sheet,,Income Statement,$],[$Cash$,,$Sales $($All Credit$),$$$16,000],[$Accounts receivable,,Cost of goods sold,$11,000],[$Inventory$,,$Operating expenses,$1,000],[$Net fixed assets,,Interest expense,$200],[$Total assets,$$20,000,$Taxes,$1,000],[,$Net income,$$2,800],[$Accounts payable$],[$Short$-$term notes payable,$$1,000,$Ratios,$],[$Long$-$term debt,,Operating Profit Margin $=,25\%],[$Common stock,$$1,500,$Return on Equity $=,20\%],[$Retained earnings,,Average collection period $=,31\mathrm{.}9375],[$Total Liabilities and equity,,Fixed Asset Turnover $=,2],[,$Current Ratio $=,+],[,$Days Sales Outstanding $=,\backslash$table$[[2],[2]]],[,$Inventory turnover $=,7\mathrm{.}27]]$