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You are required to answer the following questions by showing relevant workings. a. Neptun Berhad's common stock has a beta of 1.2. If the expected
You are required to answer the following questions by showing relevant workings. a. Neptun Berhad's common stock has a beta of 1.2. If the expected risk-free return is 4% and the market offers a risk premium of 7% over the risk-free rate, compute the expected rate of return on Neptun Berhad's common stock. (4 Marks) b. Marikh Berhad paid last year dividend (D0) of RM7.70 on its common stock. The company's dividend is expected to grow at a constant rate of 7% indefinitely. If the required rate of return on this stock is 17%, determine the value of Marikh Berhad's common stock in year 7. (4 Marks) c. Alice is considering the purchase of Pluto Berhad common stock. Alice anticipates that Pluto Berhad will pay dividends of RM2.00 per share next year and RM2.50 per share the following year. Alice believes that she can sell the stock for RM18.00 per share two years from now. If Alice's required rate of return in 17%, find out the value that she would pay for a share of Pluto Berhad's common stock today. (4 Marks) d. Zuhrah Berhad's preferred stock pays a RM0.30 annual dividend. Calculate the value of the stock if the required rate of return is 17%. (4 Marks) e. Utarid Berhad's bond matures in 20 years, has an annual coupon payment of RM40, a par value of RM1,000. Assume a required rate of return is 15%. Compute the value of Utarid Berhad's bond. (4 Marks) (Total: 20 Marks)
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