Consider you are ready to make your first investment in the following three investment alternatives: Alternative 1: Maxis bond that pays 10% on its par value in interest, sells for RM850, and matures in 12 years. For bonds of this risk class, you believe that a 12% rate of return should be required. Alternative 2: Axiata preferred stock paying a dividend of RM6 and selling for RM40. Your required rate of return is 14% Alternative 3: Digi common stock selling for RM50. The stock recently paid a RM5 dividend. The company’s return on equity is 16% and the company keeps 60% of the profits for reinvestment. You think a reasonable required rate of return for the stock is 18%. Required: a. Calculatethe value of each alternative based on your required rate of Note: No need excle formula, thank you sir
QUESTION 2
Consider you are ready to make your first investment in the following three investment alternatives:
Alternative 1: Maxis bond that pays 10% on its par value in interest, sells for RM850, and matures in 12 years. For bonds of this risk class, you believe that a 12%
Alternative 2: Axiata
Alternative 3: Digi common stock selling for RM50. The stock recently paid a RM5 dividend. The company’s
Required:
a. Calculatethe value of each alternative based on your required rate of
Note: No need excle formula, thank you sir
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