Convincing Features
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Subject
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Date
PROFESSIONAL MASTER IN BUSINESS ADMINISTRATION
COURSE CODE : MMEJ3873
COURSE NAME : CORPORATE FINANCE
DURATION : 3 HOURS (INCLUDING SUBMISSION TIME)
DATE : 17 MAY 2025
LECTURER’S NAME : WONG SENG WEE
MARKS : 100
Jawab Semua LIMA (5) soalan.
Tulis nama anda, no. matrik, no. kad pengenalan, kod kursus, nama kursus, no. seksyen dan nama pensyarah pada muka surat pertama (penjuru kiri atas )kertas jawapan dan pada setiap muka surat jawapan.
Setiap helai kertas jawapan mesti ditulis nombor muka surat pada bahagian bawah penjuru kanan.
Students caught copying / cheating during the examination will be liable for disciplinary actions and may recommend the student to be expelled from sitting for exam.
Pelajar yang ditangkap meniru / menipu semasa peperiksaan akan dikenakan tindakan disiplin dan boleh mengesyorkan pelajar diusir dari menduduki peperiksaan.
This examination paper consists of 4 pages including the cover.
Kertas soalan ini mengandungi 4 muka surat termasuk kulit hadapan.
(a) A fixed deposit account with initial amount of $50,000 earns interest quarterly with compound interest of 4% pa. What is the balance in this account after 3 years? (4 marks)
(b) If you need $50,000 after 7 years at 9%, what amount should you invest today? (4 marks)
(c) An amount of $5,000 deposited today. 7 years later the balance becomes $7,000. What is the interest rate? (4 marks)
(Total 12 marks)
(a) The current market price of a share is $150. An investor buys 100 shares. After one year he sells these shares at a price of $180 and also receives the dividend of $7.50 per share. Find out his total return ($), dividend yield (%) and capital gains in both $ and %. (10 marks)
(b) IOI Bhd’s bonds have a par value of $1,000. The bonds pays annual interest of $40 and mature in five years.
i. How much would you pay for the bonds if your required rate of return is 10%? (5 marks)
ii. How much would you pay if your required rate of return is 3%? (5 marks)
(Total 20 marks)
(a) Mars Ltd which is expected to pay a dividend of $0.60 at the end of year 1. Now assume that this dividend is expected to grow at a rate of 10% per annum in perpetuity. If the required rate of return on the share is 20%, compute the market value of one share. (6 marks)
(b) Market average return = 13%
Return on Treasury bill = 5%
Beta value of Share A = 1.4
What is the expected return from Share A by using CAPM? (5 marks)
(c) ABC Co. has a target capital structure of 40% debt and 60% common equity. The yield to maturity on the company’s outstanding bonds is 9%, and its tax rate is 40%. The cost of equity of the company is 13%. What is the company’s WACC? (7 marks)
(d) A company has earning per share of $5. The P/E of the industry is 6. What is the share price of the company using P/E multiple. (5 marks)
(Total 23 marks)
Save Bhd is considering either buying or renting a machine that can be used for 4 years and will generate annual operating net cash inflows of RM50,000. The purchase cost of the machine is RM100,000 and Save Bhd is to be responsible for the annual maintenance cost of RM15,000. At the end of the 4 years period, the machine can be scrapped for RM10,000. However, if the machine been rented, will involve annual rental of RM42,000 payable in arrears for 4 years and Save Bhd WILL NOT be responsible for any maintenance cost. The cost of capital of the company is at 10%.
Required:
(a) Determine the Net Present Value for buying and renting the machine. (20 marks)
(b) Comment on the result on Part (a). (5 marks)
(Total 25 marks)
(a) Suggest reasons why a company might buy back its own shares. (10 marks)
(b) Suggest advantages of mergers and acquisitions. (10 marks)
(Total 20 marks)
PROFESSIONAL MASTER IN BUSINESS ADMINISTRATION
COURSE CODE : MMEJ3873
COURSE NAME : CORPORATE FINANCE
DATE : 17 MAY 2025
LECTURER’S NAME : WONG SENG WEE
—End of the exam paper—
Your are a business consultant and one of your client is seeking your advice as to whether to fund a major business project by equity capital, debt capital or combination of both. Advise your client as to the differences between equity and debt capital and their implications in financing decision.
(Total 20 marks)
(a) Explain any three determinants of dividend policy and how to justify whether a company should pursuit a high dividend or low dividend payout policy. (15 marks)
(b) List and explain any three ways of financing the decision of a merger or acquisition. (15 marks)
(Total 30 marks)
Bow Berhad is evaluating a new capital expenditure project. The details are as follows:
Discount factors: Year 10% 12%
Required:
Calculate, in relation to the investment project, the:
(i) Net Present Value (NPV) @ 10% (15 marks) (ii) Internal Rate of Return (IRR) to the nearest percent. (10 marks) (iii) Commend on the financial viability of this capital expenditure project ( 5 marks)
(Total 30 marks)
The following data relates to Rasa Sayang Bhd :
The Balance Sheet extract of the company as at 31 December 2021:
Capital and Reserve
Ordinary Shares at RM1.00 per share 8% Preference Shares at RM1.00 per share Reserves
600,000
200,000
800,000
1,600,000
Non Current Liabilities
6% Loan Stock (matures on 31 December 2023)
500,000
2,100,000
Notes:
Current ordinary share price (ex-div) RM1.50.
Current ordinary dividend per share just paid RM0.10.
Expected annual ordinary dividend growth rate 3%.
Current preference share price (cum div) RM1.10.
Loan stock is quoted at RM80 per RM100.
Corporate tax rate at 30%
| Required :
(a) Calculate the following:- i. Cost of equity |
(4 marks) |
|
| ii. Cost of redeemable loan stock iii. Cost of preference shares for Rasa Sayang Bhd. | (7 marks)
(4 marks) |
(b)Calculate the WACC for Rasa Sayang Bhd (You may use the market value for weighting) (5 marks)
(Total 20 marks)
—End of the exam paper—
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