ANSWER ALL THE 8 QUESTION

1. Complete the following balance sheet using the information given. Balance Sheet Income Statement Cash Sales (All Credit) $16,000 Accounts receivable Cost of goods sold 11,000 Inventory Operating expenses 1,000 Net fixed assets Interest expense 200 Total assets $20,000 Taxes 1,000 Net income $2,800 Accounts payable Short-term notes payable $1,000 Ratios: Long-term debt Operating Profit Margin = 25% Common stock $1,500 Return on Equity = 20% Retained earnings Average collection period = 31.9375 Total Liabilities and equity Fixed Asset Turnover = 2 Current Ratio = 2 Days Sales Outstanding = 2 Inventory turnover = 7.27 (8 marks)

2. Nemo Technologies was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay dividend as below: Year Amount (RM) 1 - 3 0.25 4 0.40 5 0.55 Thereafter, earnings and dividends are expected to grow at a long-term constant growth rate of 8 percent. Assume a required rate of return of 11 percent. Calculate the current value of the shares.

3. YTL Berhad is experiencing a period of variable growth model. YTL Berhad paid a dividend of RM2.20 last year. Dividends per share are expected to grow at a rate of 15 percent for first year, 18 percent during the next two years and 6 percent thereafter. If the required rate of return on the share is 10 percent, calculate the current value of YTL Berhads share.

4. ABC Corporation recently issued 10-year bonds at a price RM1,000. These bonds pay RM60 in interest each six months. Their prices have remained stable since they were issued. Due to additional financing needs, the company wishes to issue new bonds that would have a maturity of 10 years and, a par value of RM1000, and pay RM40 in interest every six month. Compute both value of bond for ABC Corporation.i=10% (5 marks)

5. Calculate the required rate of return using CAPM for the following: (a) Mega Bhd which has a beta of 0.73 when the risk free rate is 6 percent and the market return to be 11 percent. (2 marks) (b) Lego Bhd. which has a beta of 0.8 when the risk free rate is 4 percent and the market return to be 12 percent. (2 marks)

6. Ahmad Albab hold share Ehclair Bhd in a well-diversified portfolio which is the share currently selling for RM26.50 with a beta of 1.2. He wishes that, expected Ehclair Bhds share to sell for RM28 at the end of the next year and pay a dividend of RM2. The riskfree rate is 4.5 percent and the expected return on the market is 11 percent. Decide whether Ahmad Albab should keep hold or sell the shares. Show your calculation. (5 marks)

7. Lina, a friend has given information that the share of Zip Zap Bhd is going to rise from RM62 to RM65 per share over the next year. You know that the annual return on the KLCI has been 10 percent and the 90-day MGS-bill rate has been yielding 6 percent per year over the past 10 years. If beta for Zip Zap is 0.9, decide whether you should purchase the shares or not. (5 marks)

8. Diandra is interested in purchasing a European call and put option on AXL Berhad, with a strike price of RM55 and five year until expiration. AXLs share is currently trading RM59 per share, and the volatility is 35 percent per annum. Malaysia Treasury Bills that mature in five year yield a continuously compounded interest rate of 9 percent per annum. Calculate the price of the call option and put option by using the Black-Scholes model if d1=1.0560 and d2=0.2734. (10 marks)