### Company Overview and Investment Analysis **Sudar Products Bhd Background:** - Sudar Products Bhd, a Malaysian corporation, has been in operation for nearly 30 years. - The company specializes in manufacturing, marketing, and distributing toys and computer games. - The business is split into two divisions: toys, with factories in the northern and southern regions, and computer games, with an office in the central region. - Revenue is generated equally from both divisions. **Capital Budget Review:** - The company’s budget committee is reviewing the upcoming year’s capital budget. - Investments are selected based on positive net present value and enhanced earnings potential. - A computer model, developed with financial consultants, was used to estimate costs under different inflation scenarios. **Investment Costs and Probabilities:** | Economic Condition | Probability | Cost of Investment (RM'000) | |----------------------|-------------|-----------------------------| | High Inflation | 0.4 | 30,000 | | Moderate Inflation | 0.5 | 28,000 | | Low Inflation | 0.1 | 24,000 | **Share and Financial Details:** - The ordinary share has an ex dividend market value of RM6.20 per share. - A dividend of 28 sen per share for 2014 has just been paid. - Historical dividends per share: | Year | Dividends per Share (sen) | |------|---------------------------| | 2010 | 20 | | 2011 | 22 | | 2012 | 23 | | 2013 | 25 | - The company expects future dividends to follow this trend, with 30 million shares outstanding. - Bonds issued: 6.5% bonds redeemable in six years with a nominal value of RM15 million. Each RM100 bond currently valued at RM102.50. - Forecasted net income for the company is RM31 million. - The capital structure will remain unchanged. **Required Calculations:** a) **Expected Cost of Investment and Standard Deviation**: Calculate these metrics using the provided probabilities and investment costs to evaluate investment risk and return. b) If Sudar Products Bhd follows the residual distributions model: (i) Calculate dividend per share. (ii) How much retained earnings and external finance will it need to fund its capital budget for the upcoming year?