This final assessment paper consists of questions on 10 printed pages. UBEF 2013 BUSINESS FINANCE Section 1 Totalt 60 marks! Answer ANY TWO (2) questions out of THREE (3) questions QI In raising the equity for the company, Stand Herhad has issued both the preference shares and urdinary share. For its ordinary shares, the company has recently paid a dividend od RM0.70 per share. It is expected to grow at constant rate of 4%, and has a required return of 11%. Recently. Stardust has been persuaded to buy a new company, Stardust estimates that if it acquires the company is constant growth rate would increase to 65% However, the company's risk profile will also increase, hence is required return of 12%. Should Standort Berhad go ahead with the acquisition of the new company? (6 marks) You are contemplating to purchase shares in Stardust Berhad. However, you are indecisive whether to buy the preferences stares ne the ordinary shares. What are the things that you would consider hele deciding on the type of shares that you should buy (6 marks) Stardust Berbal produces computer chips that wholesales for RM7. Each unit has variable operating costs of RM3.00 Fixed operating costs are RMS5.100 per year. The firm pays RM12.000 interest and preferred dividends of RM6.000 per year. At this point, the firm is selling 30.000 units per year and is taxed na rate of 40% (Note: Give all final answers in 2 decimal places) Calculate Stardust's operating breakeven point in units (2 marks) On the basis of the firm's current sales of 30,000 units per year and its interest and preferred dividend costs, calculate its eamings before interest and tax (EBIT) and earnings available for common shareholders 6 marks) (ti) Calculate the firm's degree of operating leverage (DOL). (2 marks) (iv) Calculate the firm's degree of financial leverage (DF) (2 marks) (V) Calculate the firm's degree of total leverage (DTL) (2 marks) (vi) Surluse he entered into a contract to produce and sell an aditional 15,000 computer chips in the coming year. Calculate the new ERIT (4 marks) Total: 30 mars This final assessment paper consists of 4 questions on 10 printed pages BEE2013 BUSINESS FINANCE Section B (Continued 02 In response to the increasing demand. Acme Glove Berhad is proposing to replace its existing machinery with a more modern equipment. The new equipment costs RM10,000,000 with an additional installation cost of RM20,000. The company expects to sell its fully depreciated existing machine for RM 1,000,000. If the new equipment is used, there will be some changes in the working capital requirement. Inventory levels will increase by RM40,000. accounts receivable will increase by RM6,000, and accounts payable will increase by RM21.000. The investment in working capital is expected to be fully recovered at the end of the equipment's life. The use of the new equipment is expected to cut manufacturing costs from its current level of RM7/unt to RMA unit. However, the production level will remain the same at 1,000 units. The useful life of this new yuipment is 8 years, and it will be depreciated using straight-line basis. Best estimates indicate that the new equipment can be sold off for RM50.000 at the end of its useful NE