Reference no: EM133075680
(a) Ann Lee is the portfolio manager of a Singapore based equity fund. She is analysing the value of Union Chemical Bhd which manufactures fertilizers and food additives. The company's dividend per share for the fiscal year ended 30 June 2021 was RM0.20 and its current share price is RM8.50 each. Analysts have forecasted a 30% growth rate for the next 5 years and thereafter 9.4% per year forever.
Required:
(i) Assuming a 13.9% discount rate, estimate the value of Union Chemical Bhd.
(ii) Determine whether Union Chemical Bhd is undervalued or overvalued.
(iii) "The constant-growth model should not be used with just any stock."Explain with reasons the assumptions used by analysts when using the constant- growth dividend model.
(b) Berk Bhd issues bonds that pay interest semi-annually and have maturities of 1 year and 30 years. The bonds have a face value of RM1,000 and an annual coupon rate of 10 percent.
Required:
(i) If investors have demanded an interest rate of 5 percent on the bond investment, what is the maximum prices to pay for the 1-year bond and 30-year bond?
(ii) Suppose that the interest rate has increased to 20%, calculate the values of the 1-year bond and 30-year bond.
(iii) Based on the calculations in parts (b) (i) and (ii) above, explain with reasons the fundamental relationship between interest rates and bond maturity.
(iv) Briefly explain the meaning of the terms "bond's coupon rate", "current yield", and "yield to maturity".
(v) Explain why bonds have protective covenants.
|
Why is the cost of equity higher for the levered firm
: You are considering two identical firms, one levered and the other unlevered. Both firms have expected EBIT of $33,000. The value of the unlevered firm (VU) is
|
|
Draw the payoff from a strategy
: a. Draw the payoff from a strategy where you write a put combined with a short position in the underlying stock.
|
|
Concepts of strategies for organizational change
: How do innovation, technology, and the concept of "going green" all pertain to the concepts of strategies for organizational change?
|
|
By how much will profit increase
: The depreciation rates for accounting and taxation are 15% and 25% respectively. Will increase (decrease) profit by how much
|
|
Explain meaning of terms bond coupon rate
: (a) Ann Lee is the portfolio manager of a Singapore based equity fund. She is analysing the value of Union Chemical Bhd which manufactures fertilizers and food
|
|
Describe budgeting in healthcare setting
: Describe budgeting in healthcare setting. What are the steps in the budgeting process, and how would you describe each step, in sequence?
|
|
Amount of net working capital
: Market Top Investors, Inc., is considering the purchase of a $465,000 computer with an economic life of six years. The computer will be fully depreciated over s
|
|
Prepare the current liabilities and long term liabilities
: Using this information, prepare the current liabilities and long term liabilities sections of a classified balance sheet at 30th Sept 2021
|
|
Essay - driving under the influence of alcohol and drugs
: Essay on Driving under the influence of alcohol and prescription drugs - What Keeps Students from Driving under the Influence of Alcohol and Prescription Drugs
|