ASSIGNMENT 2

This assignment is based on units 5 to 8 of your Business Finance Study Guide or prescribed textbook

QUESTION 1 12 marks

Make use of the relevant interest and discount values provided in the table below to determine:

a) The future value of a principal of N$ 20 000 which is invested at 12% interest, compounded five (5) years. (3)

b) The Present value amount of N$ 20 000 which is receivable in five years from now when the cost of capital is 12%. (3)

c) The annual deposit which is required to accumulate a future amount of N$120 000 over a period of four (4) years when the interest rate is 12%. (3)

d) The annual repayments on a loan of N$200 000 repayable over five (5) years at an interest rate of 12%. (3)

Extract of 12% FV and PV interest factors from the relevant tables for five (5) years:

All factors 12%	Year 1	Year 2	Year 3	Year 4	Year 5
FV interest factor (FVIF)	1.120	1.1254	1.405	1.574	1.762
FV interest factor for an annuity (FVIFA)	1.000	2.120	3.374	4.779	6.353
PV interest factor (PVIF)	0.893	0.797	0.712	0.636	0.567
FV interest factor for an annuity (FVIFA)	0.893	1.690	2.402	3.037	3.605

Question 2 16 marks

John Pandeni comes to for advice. He has an opportunity to invest N$160,0000 in a machine that will generate cash flow of N$60 000for the first three (3) years and due to normal wear and tear, N$40,000 each for years 4 and 5. The cost of capital is 12%. Using the table provided in question 1 above calculate:

a) The net present value (NPV) (13)

b) The discounted payback period (1)

c) The Productivity Index (1)

d) Would advise John Pandeni to invest in the machine (1)

Question 3 15 marks

What are the factors that distinguish debt from equity? Provide a brief explanation.

Question 4 7 marks

Name seven 7 important aspects of management of Accounts Receivables.