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Pyq (Long Term Financing)

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71 views6 pages

Pyq (Long Term Financing)

Uploaded by

farah sofea
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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FIN420: Long-Term Financing (Chapter 9)

Past Year Question June 2018

Question 4: a)

 Bond
Coupon= coupon rate x par value = 15%x1000 = 150
Par Value= RM 1000
Selling Price= RM 950
Floating Cost= floating cost x par value= 5 % x 1000 = RM 50
n= 10 years
Kd= Kd (1 – tax rate)

Kd = C + [PV – (SP – FC)] / n x 100


[PV + (SP – FC)] / 2

= 150 + [1000 – (950 – 50)] / 10 x 100

[1000 + (950 – 50)] / 2

= 160 x 100

950

= 16.84%

Kd*= Kd (1 – tax rate)

= 16.84% (1 – 0.4)

= 10.10%

 Preferred Share

Dividend= 6.2%* Par Value = 6.20% x 100 = RM 6.20

P0= Selling Price = RM 90

FC= Floatation Cost = 8%* Selling Price = 8% x 90 = RM 7.20

Kps= Dividend x 100

P0 – FC

= 6.20 x 100

90 – 7.20

= 7.49 % is the best alternative for Syawal Corporation because it offers


the lowest cost in financing
 Common Stock

D0= RM1.80

P0= Market Price= RM 40

g= 5%

FC= Floatation Cost = 3%* Selling Price= 3% x RM 40= RM 1.20

D1= D0 (1+g) = 1.80 + (1+0.05) = 1.89

Kcs= D1 + g x 100

P0 – FC

= 1.89 + 0.05 x 100

40 – 1.20

= 9.87%
Past Year Question Jan 2018

Question 4: a.

 Debt
Coupon= coupon rate x par value= 15% x 1000= 150
Par Value= RM 1000
Selling Price= RM 950
Floating Cost= floating cost x par value= 5% x 1000= 50
n= 12 years
Kd= Kd (1 – tax rate)

Kd = C + [PV – (SP – FC)] / n x 100


[PV + (SP – FC)] / 2

= 150 + [1000 – (950 – 50)] / 12 x 100


[1000 + (950 – 50)] / 2

= 158.33 x 100
950

= 16.67%

Kd*= Kd (1 – tax rate)

= 16.67% (1 – 0.4)

= 10.00%

 Preferred Share

Dividend= 6.5%* Par Value = 6.20% x 100 = RM 6.50

P0= Selling Price = RM 90

FC= Floatation Cost = 8%* Selling Price = 8% x 90 = RM 7.20

Kps= Dividend x 100


P0 – FC

= 6.50 x 100
90 – 7.2

= 7.85%
 Common Stock

D0= RM 0.90

P0= Market Price= RM 60

g= 5%

FC= Floatation Cost= 3%* Selling Price= 3% x RM 60= RM 1.80

D1= D0 (1+g) = 0.90 (1+0.05) = 0.945

Kcs= D1 + g x 100

P0 – FC

= 0.945 + 0.05 x 100


60 – 1.80

= 6.62%
Past Year Question July 2017

Question 4: a.

 Debt

Coupon= coupon rate x par value= 12% x 1000= 120


Par Value= 1000
Selling Price= RM 1250.75
Floating Cost= floating cost x par value= 20% x 1000= 200
n= 20 – 7 = 13 years
Kd= Kd (1 – tax rate)

Kd = C + [PV – (SP – FC)] / n x 100


[PV + (SP – FC)] / 2

= 120 + [1000 – (1250.75 – 200) / 13 x 100


[1000 + (1250.75 – 200) / 2

= 116.10 x 100
1025.37

= 11.32%

Kd*= Kd (1 – tax rate)

= 11.32% (1 – 0.4)

= 6.79%

 Preferred Share

Dividend= 9%* Par Value = 9% x 100 = RM 9

P0= Selling Price = RM 166.50 + RM 2.50 (floatation cost must be paid) = RM


169

FC= Floatation Cost = 2.5%* Selling Price = 2.5% x 166.5 = RM 4.16

Kps= Dividend x 100


P0

= 9 x 100
169

= 5.33%
 Common Stock

D0= RM 3.75 x 100 = 5.36%

RM 70

P0= Market Price= RM 70

g= 6%

FC= Floatation Cost= 2.5%* Selling Price= 2.5% x RM 70= RM 1.75

D1= D0 (1+g) = 3.75 (1+0.0.06) = 3.98

Kcs= D1 + g x 100

P0 – FC

= 0.0536 + 0.06 x 100

70 – 1.75

= 11.83% *

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