Week 2 Question (10 marks)

a. Assume you are currently aged twenty (20) and your parents inform you that they are planning to

give you $100,000 on your 30th birthday (10 years from now). If the relevant discount rate is 5%,

how much is your gift worth today? Provide complete calculations in your answer?

b. Assume you have $20,000 in your bank account. After five (5) years, you are intending to have

$35,000 in your account. What annual rate of return must you earn on your investment to achieve

your target? Provide complete calculations in your answer.

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Week 3 Question

a. Kristi is considering an investment that will pay $7,500 a year for eight years, starting one year

from today. How much should she pay for this investment if she wishes to earn a 6% rate of

return? Provide complete calculations in your answer

(6 Marks)

b. Kristi was offered three (3) different assets, as listed below:

Asset 1 pays annual interest rate of 9% compounding annually.

Asset 2 pays annual interest rate of 8.9% compounding semi-annually.

Asset 3 pays interest rate 8.95 compounding monthly.

Based on effective annual interest rate calculations, which of the above assets is the best choice

for Kristi. Show your calculations for all three (3) assets?

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Week 4 Question

Delta Limited has two possible investment alternatives and seeks your help to select the best option

for them to choose. The table below gives you the initial investment and the expected future cashflows over a 4 year period. The required rate of return is 12%

Year Project A Project B

0 -95,200 -162,000

1 47,800 68,000

2 37,200 65,600

3 41,400 61,000

4 29,200 54,600

a. Calculate the profitability index for each project.

(4 Marks)

b. Calculate the the Net Present Value (NPV) for each project

(4 Marks)

c. Which project should be selected based on your calculations? Explain your answer.

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Week 5 Question (10 marks)

b. Kite Limited has provided the following forecast for the upcoming year for their business. Based

on the given information, calculate the operating cashflow.

The company projected sales volume is $143,200. Cost of goods sold is 60% of the sales revenue

and administration and other expenses is $10,500. The depreciation expenses will be $8,000 and

the corporate tax rate is 30%. Show all your calculations.