CHAPTER 13 COST OF CAPITAL

Study problem 13B

1.)5.6328%
2)10.6%
3)13%
4)13%
5)14%
6)9.8%
7)
a)12.7%
b)13.9%
8)3.72%
9)8.2036%
10)7.95%
11)8.79%
12)18.72%
13)9.47%
14)13.4%
15)10.18%
16)3.72%

Study problem 13C

1)16.55%
2)12.28%
3)7.93%
4)8.46%
5)9.02%
6)13.4%
7)a.20.4%
b.21.23%
8)14.11%
9)cost after tax=4.83%
Cost of ps=9.1%
Cost of cs=16.6%
WACC=11.42%
11)after tax cost of bond=9.311%
Kps=8.829%
Kcs=13.84%
WACC=10.63116
12)7.99%
13)12.01%
14)13.85%
15)AFTER tax cost of debt=4.66%
Cost of ps=6.74%
Cost of cs= 12.56%
WACC=9.32%

CHAPTER 12 stock valuation

Study Problem 12B

1) D0= RM 3.50
2) P0= RM 18.75
3) P0= RM 47.70
4) Vps= RM 83.06
5) P0= RM 39.21
6) P0= RM 43.8842
7) Kps=8%
b) Vps= D/ Kps= RM 33.30
c) Not purchase because the stock is overvalued. Requred return> Expected
return
8) Vcs= RM 20.03
9) Vcs= RM 30.80
10) Vps= RM 62.50
11) Vps= RM 57.5
12) a) Kps= 6.25%
b) Vps= RM 27.78
c) The investor should not acquire the stock because the required rate of
return> expected rate
13) a) First investment: RM 90
Vb= RM 926.303
Second investment= Vps= 12/0.15= RM 80
Third investment: Vps= RM22.50
Bond , the intrinsic value is RM 926.303 and the selling price is RM 926.30.
Accpted, it depends on the
Individual. The reason is Intrinsic Value= Selling Price.
14) 25% for four years( start constant at 8%(five years)
D0= 2.15
D1= 2.6875
D2=3.3594
D3=4.19923
3

D4=5.24904
Step 3: RM 2.3996 + RM 2.67809 + RM 2.9801+ RM 3.33576+ 90.068= RM 101.23
15) Step 1 : P2= D3/ Kcs-g= RM 76.32
Step 2
D0= RM 2
D1= RM 2.4
D2= RM 2.88
D3= RM 3.0528
Step 3:
Vcs= RM 67.6363

16) DEBT: A) NOTAN OWNERSHIP INTEREST

B) CREDITORSDO NOT HAVE VOTING RIGHT
C) INTEREST IS CONSIDER A COST OF DOING BUSINESS AND IS TAX DEDUCTIBLE
D) CREDITORS HAVE LEGAL RECOURSE IF INTEREST OR PRINCIPAL PAYMENTARE MISSED.
E) EXCESS DEBT CAN LEAD TO FINANCIAL DISTRESS AND BANKRUPTCY

EQUITY : A) OWNERSJIPINTEREST
B) COMMON STOCKHOLDERS VOTE FOR THE BOD AND OTHER ISSUES
C) DIVIDENDS ARE NOT A LIABILITY OF THE FIRM AND STOCKHOLDER HAVE NO LEGAL
RECOURSE IF DIVIDEND ARE NOT PAID
D) AN ALL EQUITY FIRM CANNOT GO BANKRUPT

STUDY PROBLEM 12 C

1A) RM2.65

B) RM2.809
C) RM2.977
D) RM3.1561
E) RM3.3455

2) RM121.33
3) RM63.9167
4) 13.545%
5) 11.1326%
6) 16.475%
7) 7.543%
8) 10.97%
9) 33.409009
10) RM38.84
11) 10% (UNDERVALUED)
12) RM40
13) RM133.33
14) RM37.00
15) FIRST BOND : RM1123.916
SECOND BOND : RM71.429
THIRD BOND : RM24.692

CHAPTER 11 .BOND
STUDY PROBLEM 11 B

1)
2)
3)
4)

RM 1269.416
RM 999.956
RM 875.148
I) RM 1269.416
II) RM 999.956
III) RM 875.148
5) RM 1131.216
6) RM 1046.752
7) I) RM 1269.416
IV) RM 1131.216
V) RM 1046.752
9) RM 999.956
10) RM 1150.96
11) RM 875.148
12) RM 1000.024
13) RM 1308.244
14) RM 803.02
16) RM 932.408 (FAIR VALUE)

STUDY PROBLEM 11C

1.
2.
3.
4.
5.
6.

RM1,068.019
RM1,000
RM618.312
RM1,198.002
RM920.562
a)7.89%
b)RM926.303
7. a) RM1,132.48(nana)
6

b)RM871.87( nanu)
c) RM1,000 (nani)
8. YTM =9.537%
9. YTM=9.78%
10. YTM 4.93 x 2 =
11. 10.25%
12. a)6.28%
b) RM1,444.472
13. YTM=12.86%
15. b) RM837.76
c) RM1155.79
16. RM1,149.33

9.86%

TIME Value

Study problem 5B
4. (a) RM10,600
b) RM1332.26
(c) RM23,966
-----------------------------------------------------------

a) RM10,800
b) RM14,693
c) RM31,722
5. RM5030.50
6. RM29,895
7. a) RM38905.50
b)RM15424.20
c) RM3,798.60
d) RM34,460.10
8. i=7%
9.a) 15 years
b) 5 years
c) 6 years
d) 20 years
10. i=12%
11. a) 10%
b) 5%
c) 9%
d) 20%
12. RM1,806.11
13. RM20,158.75
14. RM38,960
7

15. RM295.95
16. RM2,818.55
17. RM1,047.23
18. RM345.14
19. RM43,603.56
20. i=1%
21. RM130,800
22. 150(2.6730)=RM400
450(0.8395) = RM377.775
23. 12,500(1.1576)=RM14,470
RM14,470 RM8,100 = RM6,370
6,370(1.1576)= RM7,373.912

Study problem 5C
1. RM2,050.10
2. RM7721.70
3. a)RM269.85
b) RM470.10
c) RM947.28
d) RM441.94
4. RM852.22
5. RM2661
6. RM2762.20
7.

a) RM732.61
b) RM6917.90
c) RM3028.90
d) RM765.10

8. RM2232.36
9.RM2232.572
10. RM187500
11.

a)RM37500
b) RM83333.33

c) RM24444.44
12.

a)RM22475.52
b)RM20083.06
c) RM12616.224
d) RM3318.084

13.

PMT=RM2101.58

14.

year 1 = RM471.70
year
year
year
year
year
year
year

2
3
4
5
6
7
8

=
=
=
=
=
=
=

RM178.00
RM335.84
RM396.05
RM373.65
RM352.50
RM332.55
RM500

year 9 = RM295.95
1. RM279.20
TOTAL PRESENT VALUE: RM2657.46
15.

i) RM865.90
ii) RM1773
RM1773-RM300 = RM1473
PV=FV (PVIF

i,n

= RM1099.15
TOTAL PRESENT VALUE : RM865+RM1099.15 =RM1965.05
16.

i.
ii.
iii.

RM420
RM559.02
RM993
TOTAL FUTURE VALUE : RM 559.02 + RM 993 = RM1552.02

17. RM 7323.50
18.
9

YEAR 1 =RM 321

YEAR 2 =RM228.98
YEAR 3 =RM183.75
YEAR 4 =RM589.86
YEAR 5 =RM631.17
YEAR 6 =RM675.315
TOTAL PRESENT VALUE = RM2630.065
19. RM 1824.00
20. RM 31,237.50..RM41,577.1125
21.RM 6588.13312
22. RM 530.173
23. FVordinary = RM126,005
FVannuity due = RM138,605.50
Difference = RM138,605.50 - RM126,005 = RM 12,600.50

10