Casamoca's common stock is selling for RM70 and recently paid dividends of RM5 per share based on earning per share (EPS) of RM10. Firm's return on equity (ROE) is 15% and required rate of return is 14%.          

a. What is the value of Casamoca's stock?

b.  Should you purchase this stock? Why?

 

Shikazi Bhd is experiencing rapid growth. Dividends are expected to grow at 12% per year during the next 3 years, and then 8% per year indefinitely. The required rate of return on this common stock is 16% and the stock currently sells for RM33.60 per share. What is the expected dividend for the coming year (D1)?

 

 

Kandisi Bhd, a constant growth company has a current market stock price of RM32.00. Kandisi's next dividend is forecasted to be RM2.00 and Kandisi is growing at an annual rate of 6%.

 

a.What is Kandisi's dividend yield?

b.What is the expected rate of return for this company?

c. As a financial manager, you have access to insider information concerning a switch in product lines that would change the growth rate. 

What growth rate would you have to use to get the new expected rate of return of 14%?