4 Sudar Products Bhd has been operating its business successfully for nearly 30 years. It is a Malaysian listed company which manufactures, markets and distributes a large range of toys and computer games for children. The company generates its revenue from both toys and computer games division The toys division specialises in the production of different types of toys and operates from its own factories located in the northem and southern region of Malaysia. The computer games division has its office in the central region. The company's budget committee is reviewing its capital budget for the upcoming year. All the investments were evaluated and selected on the criteria that these investments will contribute positive net present value and enhanced earnings of the company for the upcoming year. The fund requirements for all of its investments was prepared based upon the forecast cost of the investments and the associated probabilities. The budget committee developed probabilities estimates using a computer model which simulates a number of possible future inflation scenarios. The computer model has been built with the aid of a firm of financial consultants Economic condition Probabilities 0.4 High inflation Moderate inflation Low inflation Cost of investment RM000 30.000 28.000 24,000 0.5 0.1 The ordinary share of Sudar Products Bhd has an ex dividend market value of RM6.20 per share. An ordinary dividend of 28 sen per share for 2014 has just been paid. The pattern of recent dividends is as follows: Year 2011 2010 20 2012 23 2013 25 Dividends per share (sen) 22 The company's next year's dividend follows the past dividend trend. It has 30 million shares outstanding Sudar Products Bhd also has in issue 6.5% bonds redeemable in six years' time with a a total nominal value of RM15 million. The market value of each RM100 bond is RM102.50 Redemption will be at nominal value. Sudar Products Bhd's forecasted net income is RM31 million The company's target capital structure will be maintained at current level. REQUIRED: a) Calculate the expected cost of investment and the standard deviation b) If Sudar Products Bhd follows the residual distributions model: 6 Calculate dividend per share. (11) How much retained earnings and external finance will it need to find its capital budget for the upcoming year? REQUIRED: a) a Calculate the expected cost of investment and the standard deviation, b) If Sudar Products Bhd follows the residual distributions model: (i) Calculate dividend per share. 4 Sudar Products Bhd has been operating its business successfully for nearly 30 years. It is a Malaysian listed company which manufactures, markets and distributes a large range of toys and computer games for children. The company generates its revenue from both toys and computer games division The toys division specialises in the production of different types of toys and operates from its own factories located in the northem and southern region of Malaysia. The computer games division has its office in the central region. The company's budget committee is reviewing its capital budget for the upcoming year. All the investments were evaluated and selected on the criteria that these investments will contribute positive net present value and enhanced earnings of the company for the upcoming year. The fund requirements for all of its investments was prepared based upon the forecast cost of the investments and the associated probabilities. The budget committee developed probabilities estimates using a computer model which simulates a number of possible future inflation scenarios. The computer model has been built with the aid of a firm of financial consultants Economic condition Probabilities 0.4 High inflation Moderate inflation Low inflation Cost of investment RM000 30.000 28.000 24,000 0.5 0.1 The ordinary share of Sudar Products Bhd has an ex dividend market value of RM6.20 per share. An ordinary dividend of 28 sen per share for 2014 has just been paid. The pattern of recent dividends is as follows: Year 2011 2010 20 2012 23 2013 25 Dividends per share (sen) 22 The company's next year's dividend follows the past dividend trend. It has 30 million shares outstanding Sudar Products Bhd also has in issue 6.5% bonds redeemable in six years' time with a a total nominal value of RM15 million. The market value of each RM100 bond is RM102.50 Redemption will be at nominal value. Sudar Products Bhd's forecasted net income is RM31 million The company's target capital structure will be maintained at current level. REQUIRED: a) Calculate the expected cost of investment and the standard deviation b) If Sudar Products Bhd follows the residual distributions model: 6 Calculate dividend per share. (11) How much retained earnings and external finance will it need to find its capital budget for the upcoming year? REQUIRED: a) a Calculate the expected cost of investment and the standard deviation, b) If Sudar Products Bhd follows the residual distributions model: (i) Calculate dividend per share