a) TEE Bhd has issued 5 million ordinary shares, with a market price of RM each. The company has RM1 million of irredeemable 13% debentures in issue, with a market price of RM85 per RM100 nominal value. It also has issued buwwww preference shares at 15%, with a nominal value per share of RM1, and were market value of RM1.45. The tax rate is 24% per annum. Recently, the company has recorded its current earnings of RM1.5 million, and paid dividends in the past years as below: --0-26 D O SUC1.12 Do 2013: RM0.80 2 2014: RM2.90 D2 2015: RM1.00 D3 2016: RM0.85 a 2017: RM1.20 Using the information given above, calculate the weighted average cost of capital of TEE Bhd. (12 marks) b) FIN Bhd recently had announced its revenue increased by 20% to RM201.6 million from RM168 million in last financial year. The firm plans to pay a dividend of RM4.20 per share this year. The company has an expected earnings growth rate of 5.5% per year and an equity cost of capital of 12%. i) Assuming FIN's dividend payout rate and expected growth rate remain constant, barn oberen onleulat SINKS share b) FIN Bhd recently had announced its revenue increased by 20% to RM201.6 million from RM168 million in last financial year. The firm plans to pay a dividend of RM4.20 per share this year. The company has an expected earnings growth rate of 5.5% per year and an equity cost of capital of 12%. i) Assuming FIN's dividend payout rate and expected growth rate remain constant, and the company does not issue or repurchase shares, calculate FIN's share price. (3 marks) ii) FIN Bhd expects an increase of cash flows after years of expanding its businesses in the South-East Asia region. The firm had announced a dividend of RM3 per share payable this year and plans to repurchase shares using its remaining funds. If the total payout rate remains constant, calculate FIN's share price. (3 marks) c) Discuss the advantages and disadvantages of debt finance compared to equity finance for public listed firms. (7 marks) a) TEE Bhd has issued 5 million ordinary shares, with a market price of RM each. The company has RM1 million of irredeemable 13% debentures in issue, with a market price of RM85 per RM100 nominal value. It also has issued buwwww preference shares at 15%, with a nominal value per share of RM1, and were market value of RM1.45. The tax rate is 24% per annum. Recently, the company has recorded its current earnings of RM1.5 million, and paid dividends in the past years as below: --0-26 D O SUC1.12 Do 2013: RM0.80 2 2014: RM2.90 D2 2015: RM1.00 D3 2016: RM0.85 a 2017: RM1.20 Using the information given above, calculate the weighted average cost of capital of TEE Bhd. (12 marks) b) FIN Bhd recently had announced its revenue increased by 20% to RM201.6 million from RM168 million in last financial year. The firm plans to pay a dividend of RM4.20 per share this year. The company has an expected earnings growth rate of 5.5% per year and an equity cost of capital of 12%. i) Assuming FIN's dividend payout rate and expected growth rate remain constant, barn oberen onleulat SINKS share b) FIN Bhd recently had announced its revenue increased by 20% to RM201.6 million from RM168 million in last financial year. The firm plans to pay a dividend of RM4.20 per share this year. The company has an expected earnings growth rate of 5.5% per year and an equity cost of capital of 12%. i) Assuming FIN's dividend payout rate and expected growth rate remain constant, and the company does not issue or repurchase shares, calculate FIN's share price. (3 marks) ii) FIN Bhd expects an increase of cash flows after years of expanding its businesses in the South-East Asia region. The firm had announced a dividend of RM3 per share payable this year and plans to repurchase shares using its remaining funds. If the total payout rate remains constant, calculate FIN's share price. (3 marks) c) Discuss the advantages and disadvantages of debt finance compared to equity finance for public listed firms. (7 marks)
