Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
If Sudar Products Bhd follows the residual distributions model:
(i) Calculate dividend per share.
Transcribed Image Text:b)
If Sudar Products Bhd follows the residual distributions model:
(1)
Calculate dividend per share.
Transcribed Image Text:4.
Sudar Products Bhd has been operating its business successfully for nearly 30 years. It is a Malaysian
listed company which manufactures, markets and distributes a large range of toys and computer
games for children. The company generates its revenue from both toys and computer games division.
The toys division specialises in the production of different types of toys and operates from its own
factories located in the northem and southern region of Malaysia. The computer games division has
its office in the central region. The company's budget committee is reviewing its capital budget for
the upcoming year. All the investments were evaluated and selected on the criteria that these
investments will contribute positive net present value and enhanced earnings of the company for the
upcoming year. The fund requirements for all of its investments was prepared based upon the forecast
cost of the investments and the associated probabilities. The budget committee developed
probabilities' estimates using a computer model which simulates a number of possible future inflation
scenarios. The computer model has been built with the aid of a firm of financial consultants.
Economic condition
Probabilities
Cost of investment
RM'000
High inflation
0.4
30,000
Moderate inflation
0.5
28,000
Low inflation
24,000
0.1
The ordinary share of Sudar Products Bhd has an ex dividend market value of RM6.20 per share. An
ordinary dividend of 28 sen per share for 2014 has just been paid. The pattern of recent dividends is as
follows:
Year
2010
2011
2012
2013
25
Dividends per share (sen)
23
20
22
The company's next year's dividend follows the past dividend trend. It has 30 million shares
outstanding. Sudar Products Bhd also has in issue 6.5% bonds redeemable in six years' time with a
total nominal value of RM15 million. The market value of each RM100 bond is RM102.50.
Redemption will be at nominal value. Sudar Products Bhd's forecasted net income is RM31 million.
The company's target capital structure will be maintained at current level.
REQUIRED:
a)
Calculate the expected cost of investment and the standard deviation.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education