Maniam Motors has yet to pay a dividend on its common stock. However, the company expects to pay a RM1.00 dividend starting two years from now. Thereafter, the stock dividend is expected to grow at a constant rate of 5 percent a year. The stock beta is 1.4, the risk-free rate is 0.06, and the expected market return is 0.12. What is the stock expected price four years from now?

Select one:

a. RM10.63

b. RM11.87

c. RM12.32

d. RM13.58

The MM Airline Company has consulted its investment bankers and determined that they could issue new debt with a yield of 8%. If the corporate tax rate is 24%, what is the after-tax cost of debt to MM?

Select one:

a. 6.08 percent

b. 1.92 percent

c. 3.45 percent

d. 5.50 percent

Vertigo bonds have a par value of RM1,000. . The bonds carry a coupon interest rate of 14 percent. Interest is paid semi-annually. The bond will mature in seven years. If the current market price is RM1,092.65, will you purchase the bonds if your required interest rate is 10 percent? What is your intrinsic value for the bonds?

Select one:

a. Yes; RM1,294.70

b. Yes; RM1,115.72

c. No ; RM914.25

d. Yes; RM1,197.98

What is the current price of a bond maturing in 12 years, with RM1,000 par value, coupon interest rate of 14 percent paid semi-annually, that has a YTM of 12 percent?

Select one:

a. RM 610.80

b. RM1,123.90

c. RM1,125.50

d. RM 690.30