GUIDED ANSWER TUTORIAL 2 BFN20103

QUESTION 1
(b) Vcs = RM75.63
(c) k = 3.5%
(d) Vb = RM1,099.02
QUESTION 2
(a) Cost of debt (kd) = 6.6%

(b) Cost preferred share (kps) = 7.68%

(c) Cost of common share (kcs) = 12.34%

(d)The weighted for each source of capital.
Source of Capital Market Value Weighted
(RM)
Bond 200,000 200,000√ 0.17
1,200,000√
Preferred stock 400,000 0.33
Common stock 600,000 0.50

(f) Weighted Average Cost of Capital (WACC) = 9.84%

QUESTION 4
(i) Payback Period

Morita XX Project = 3.75 years

Mindmark YY Project = 3.83 years

(ii) Net Present Value

Morita XX Project = RM55,488

Mindmark YY Project

Year Cash Flow PVIF6%,n) PV

1 RM90,000
 2 RM100,000

3 RM110,000
4 RM120,000
5 RM130,000

Total PV of Cash Flow

(-) Initial investment (RM400, 000)
Net Present Value RM58,463

(iii) Profitability Index

Morita XX Project = 1.123

Mindmark YY Project = 1.146