MAF653 – DEC 2016

SUGGESTED ANSWER
MAF653 Question 1 A.
Required rate of return = 5% / +
2 / ( 10% - 5%) / = 15% Mr.
Adam’s Expectation: Yr
Dividend (RM) PVIF 15%, n PV of
Dividend 1 1.50 / 0.8696 1.304
2 1.50 (1+0.04) = 1.56 / 0.7561
1.180 3 1.56 (1+0.04) = 1.62 /
0.6575 1.065 4 1.62 (1+0.06 / )
= 1.72 0.5718 0.983 P 1 = 4.532
P4 = 1.72 (1+0.07) / = 1.8404
( 15% - 7 %) / 0.08 = RM
23.005 Discount to PV = RM
23.005 x 0.5718 / = RM13.15
P1 + P2 = RM 4.5324 + RM
13.15 = RM 17.68 Mr. Lee’s
Expectation : D = 1.50 / Ke
15% / = RM 10 (12 / x 1⁄2
marks = 6 marks) (ii) IV MP
Decision Mr. Lee RM 10.00
RM 12 Do not Invest : Market
price is overvalued // (2/ x 1
mark = 2 marks) B. (i) Intech
Megatech Dividend Payout ratio
(Div. per share / EPS) 1 1.50 / =
0.25 6 / 0.8 / = 0.15 5.5 / (4 / x
1⁄2 marks = 2 marks) (ii) Intech
Megatech IV 1.50 / (1 +0.05) /
= 1.575 12%/ - 5 % / 0.07 =
RM22.50 / 0.80 / (1+0.03) / =
0.824 12% / - 3% / 0.09 = RM
9.16/ ( 10/ x 1⁄2 marks = 5
marks) c. Factors affecting share
prices: i) Earnings
announcement ii) Industry
performance iii) Dividend
MAF653 – DEC 2016 iv) Stock
split v) Share buy-back vi)
Product innovation vii)
Takeover or merger viii)New
major contracts ix) Insider
trading x) Analyst upgrade and
downgrade (Any 3points +
explanations x 2 marks = 6 marks)
(Total: 21 marks) QUESTION
2A. i. Convertible bond is the
bond that can be converted into
ordinary shares, while
plain vanilla bond is a straight
bond that does not have any
special features.✓✓ Or any
other relevant answers.(2
marks) ii. Value of straight bond
= 90/2✓X PVIFA 6%, 16✓ +
1000✓ X PVIF 6%, 16✓ = 45
(10.106) ✓ + 1000(0.3936) ✓ =
454.77 + 393.60 = RM848.37
(6✓ x 1⁄2= 3 marks) iii.
Conversion ratio = RM1,000✓
RM20✓ = 50 shares Conversion
value = Conversion ratio x
market price = 50 shares✓ x
RM25✓ = RM1,250 The
minimum value of bond is the
higher of conversion value and
straight bondvalue. So, the
minimum value is RM1250 ✓✓
(6✓ x 1⁄2= 3 marks) 2 MAF653
– DEC 2016 B. i. Meliniaga:
Bond price = 120 (PVIFA
8,14%) + 1000 (PVIF 8,14%) =
(120✓ x 4.6389✓) + (1000 x
0.3506✓)