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a. Suria Bhd's dividend in the next year is expected to be RM2, and dividends are expected to grow at 10%. The beta of stock
a. Suria Bhd's dividend in the next year is expected to be RM2, and dividends are expected to grow at 10%. The beta of stock is 1.5. Currently, the market risk premium for the stock is 8%, and the 3 month T-Bill rate is 7% Suria Bhd pays dividends annually at year end. Calculate the price of Suria Bhd stock 2 years from now. (6 marks) b. The current stock price of KTM Bhd is RM4.70. You expect a dividend of RM0.80 in one year and the stock price to be RM5.50 in one year. If you purchase KTM stock at the current market price, what return do you expect to earn over one year? (4 marks) c. Calculate the weighted average cost of capital (WACC) for a firm with the following sources of funds and corresponding required rates of return: RM5 million common stock at 16%, RM500,000 preferred stock at 10%, and RM3 million debt at 9%. All amounts are listed at market values and the firm's tax rate is 35%
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