Discuss the relevant terms and issues relating to time value of money and solve the problems. It is recommended that you use a spreadsheet (Excel) for your calculations

1. Calculate future values

1. Figure out future the value of a single deposit of 15,000, that earns compound interest for 4 years at an interest rate of 10% per year.
2. The annual interest rate that will produce a future value of 13,416.80 in 6 years form a single deposit of 8,000.
3. The size of annual cash flows for an annuity of nine cash flows that will produce a future value of 79,428.10 at an interest rate of 0.09 per year.
4. The number of periods needed to produce future value of 17,755.5 from an initial deposit of 7500, if the annual interest rate is 9% p.a.

2. Fund of specified size

On January 1, 2008, Surfside manufacturing borrowed 400,000 from a bank to pay for a new equipment. The note requires that interest be paid annually and that the entire principal be paid in a single amount on December 31st. To provide for the final payment of principal and interest in the amount of 440,000, Surfside plans to make equal quarterly deposits in an investment fund that earns 8% per year compounded quarterly (2% per quarter). The deposit will be made on June 30 2008, and the last on December 31, 2008. How large must the quarterly deposits be to produce a fund of 440,000 on December 31,2008?

Basics of Financial Analysis

Problems:

1.

Current assets of company ABC plc are 15 000 and current liabilities are 10 000 mil. Inventories of the same company are 4 500.

Required:

1. Determine the working capital of this company.
2. To assess the liquidity find current ratio and quick ratio (acid test).
3. Determine the maximum inventory size that makes the acid test at least 0.8.

2.

Company XYZ has equity of 50 mil. In the last year the total cost of the company was 112 mil. and total revenues were 120 mil. The tax rate was 40 %.

Required:

1. Determine the profit before tax and profit after tax for the last year.
2. Find the companys return on equity (ROE).
3. Find the maximum total cost of the company that assures that the ROE does not fall under 8 per cent.
4. The company issued new shares in total amount of 20 mil. What is the ROE now?