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1.Iman owns 400 shares of food company Sedap Food Berhad which he purchased during the recession in January 2017 for RM35 per share. Sedap Food Berhad is regarded as a relatively safe company because it provides a basic product that consumer need in good and bad economic times. Iman read in the Malaysian Business Magazine that the company’s board of director had voted to split the stock 2-for-1. In June 2018, just before the stock split, Sedap Food Berhad shares were trading for RM75.14.

Answer the following questions about the impact of the stock split on his holdings.

How many shares of Sedap Food Berhad will Iman own after the stock split?

 Immediately after the split, what do you expect the value of Sedap Food Berhad to be?

Compare the total value of Iman’s stock holdings before and after the split, given that the price of Sedap Food Berhad stock immediately after the split was RM37.50. What do you find?

 Does Iman experience a gain or loss on the stock as a result of the 2-for -1 split?

2.. Your uncle died last year and left you money in his will. You are to receive $200,000 in three years (time 3) and $2,000,000 ten years from today (i.e., in time 10). (a) What is the value of the inheritance today (in time 0) if the appropriate discount rate is 6% (compounded annually)? (b) If you invest the money when you receive it, how much will it grow to 30 years from today (i.e., in time 30) if you earn 6% compounded annually? 2. Your neighbor is buying a new Tesla electric car. He has the following options to finance the purchase: I. Pays $20,000 today (in time 0) and $50,000 in two years (time 2) II. Make payments under an increasing schedule as follows: Time 0 $8,000 Time 1 $10,000 Time 2 $12,000 Time 3 $14,000 Time 4 $16,000 Time 5 $18,000 III. Make 72 monthly payments over 6 years of $1,100 payable at the end of each month. (a) If the annual interest rate is 7%, calculate the present value of each option. (b) At what interest rate do Option II and Option III have the same present value?

3.

Your manager asks you to analyse the financial statements of two companies in different industries. What is the most suitable method for comparing the firms?

Select one:

a. Compare each firm to its peers based on the GICS

b. Compare one firm to the other

c. Compare each firm to a random selection of firms

d. Firms should not be compared unless they are identical