Free Essay

Submitted By KAMALA07

Words 306

Pages 2

Words 306

Pages 2

Calculate questions (a) –(e):

a) You can purchase a note that will pay RM10,000 five years from now. What is the note’s present value with an annual interest of 10 percent?

b) Suppose you borrowRM6,210 now and agree to repay the loan in five years plus interest charged at a 10 percent annual rate. Find the future value of the note at the end of year 5.

c) Suppose you borrow RM60,000 now and agree to repay the loan in eight years plus interest charged at a 10 percent annual rate. Find the future value of the note at the end of year 5.

d) A piece of land in Cerok Tok Kun has been set for sale at RM4,500 per acre. If it is expected to increase in value at a compound rate of 6 percent per year, what will be its value in 25 years from now.

e) Datuk Biru Haru observes that his starting salary 30 years ago was RM1,000 per month. How would this compare with today’s RM25,000 salary, assuming a 8 percent annual increase?

f) Table below shows the expected cash flows to be generated by three proposed projects (A, B & C). As the Project Leader of your company, calculate the Internal Rate of Returns (IRR) for the three projects. Based on the IRR of each project, you are required to recommend the most viable project that would actually be undertaken. Give your reasons.

|Year |Investment A |Investment B |Investment C |

| |(RM) |(RM) |(RM) |

|0 - present |-50,000 |-50,000 |-50,000 |

|1 |8,000 |15,800 |21,000 |

|2 |10,000 |15,800 |19,000 |

|3 |16,000 |15,800 |15,000 |

|4 |20,000 |15,800 |13,000 |

|5 |25,000 |15,800 |12,000 |