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You are required to answer the following questions by showing relevant workings. a. Asam Laksa Berhad just paid a dividend of RM1.95 per share on
You are required to answer the following questions by showing relevant workings. a. Asam Laksa Berhad just paid a dividend of RM1.95 per share on its common stock. The dividends are expected to grow at a constant rate of 6% per year indefinitely. If investors require an 11% return on Asam Laksa Berhad's common stock, find out the common stock price be in three years. (4 Marks) b. Asam Pedas Berhad's common stocks price is growing quickly. Dividends are expected to grow at 30% per year during the next three years, with the growth rate falling off to a constant 6% thereafter. If the required rate of return on these common stocks is 13%, and Asam Pedas Berhad just paid RM1.80 dividend, determine the current share price. (6 Marks) c. Bond X is a premium bond making annual payments. The bond pays an 8% coupon, has YTM of 6%, and has 13 years to maturity. Bond Y is a discount bond making annual payments. This bond pays a 6% coupon, has YTM if 8%, and has 13 years to maturity. If interest rate remains unchanged, compute the price on these bonds to be in: i. one year (4 Marks) ii. 10 year (4 Marks) Based on your computation in part (i) and (ii), interpret your findings. (2 Marks) (Total: 20 Marks)
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