Introduction to Finance (BAFD2013) January 2024 Final Examination CONFIDENTIAL This question paper consists of ONE (1) section. (100 Marks) There are FOUR (4) questions in this paper. Answer ALL questions in the ANSWER SHEET TEMPLATE provided. Question 1 Debunga Berhad is trying to invest in three mutually exclusive flower design projects. All projects have an initial cash outflow of RM5,000. Given below are the cash inflows for each project: RM'000 Project Teratai Project Year Anggerik Project Mawar 3,000 From the information given, you are required to answer the following questions: a. If the company applies the Payback Period decision rule, which project should Debunga Berhad choose? (8 Marks) b. If the required rate of return is 12% and the company applies the Net Present Value decision rule, which project should Debunga Berhad choose? (8 Marks) c. Ifthe company applies the Profitability Index decision rule, which project should Debunga Berhad choose? (8 Marks) d. Based on your answers in part (a) to (), which project should Debunga Berhad finally choose to invest? Explain your answer. (6 Marks) (Total: 30 Marks) Question 2 Bunga Kertas Berhad (BKB) is a company with one of the subsidiary is in Turkiye. BKB's before tax cost of debt is 15%. BKB's perpetual preferred stock is at a price of RM50 a share. The preferred stock issue is expected to pay a constant annual dividend of RM4.80 a share. BKB's commen stock has a beta of 1.20. The market risk premium is 8% and the risk-free rate is 4%. The tax rate is 30%. From the above information, you are required to answer the following questions. a. Compute: i after-tax cost of debt (6 Marks) i cost of preferred stock (6 Marks) iii. cost of common stock (6 Marks) Introduction lo Finance (BAFD2013) January 2024 Final Examination CONFIDENTIAL b. BKB has a target capital structure of 50% common stock, 10% preferred stock and 40% debt. Based on your computation in part (a), calculate BKB's Weighted Average Cost of Capital (WACC). (6 Marks) c. BKB is considering a project that will give a return of 5%. Should BKB proceed with this project? Explain your answer. (6 Marks) (Total: 30 Marks) Question 3 Puan Delima is considering depositing her money into one of the banks for three years. She now has RM10,000 in her hand. She is considering the three following alternatives: Alternative 1: Bank A offers 10% interest rates compounded yearly. (4 Marks) Alternative 2: Bank B offers 12% interest rates compounded semi-annually. (4 Marks) Alternative 3: Bank C offers 16% interest rates compounded quarterly. (4 Marks) You are required to calculate the value of money for each alternative. Based on the calculation which bank should Puan Delima choose? Explain your answer. (8 Marks) (Total: 20 marks) Question 4 A popular frying pan sold in a store has weekly demand of 20 units. Each pan is sold for RM50. The ordering cost is RM75 per order. The carrying cost is 30% of the selling price per unit per year. The store operates 50 weeks a year. From the above information, you are required to answer the following questions. a. Determine the economic order quantity. (10 Marks) b. Compute the total costs of inventory. (10 Marks) (Total: 20 Marks)