Finance Answers

A firm purchased a machine on hire purchase with a down-payment of 80,000

and agreed to pay the balance in three equal installments of 80,000 each.

The cash price of the machine is 2,90,000.

The hire purchase price of the machine is___?

A project costs 29,000

and is expected to have a useful life of three years of which its scrap value will be 5000.

The project is expected to yield net profits of 1,000p.a. over its useful life.

Using the average book value of the asset,

the accounting rate of return (ARR) will be____?

Mcqs

1. What is the expected value of NPV(to the nearest dollar) for the following situation?

The firm expects an NPV of $10,000 if the economy is exceptionally strong (40% probability),

an NPV of $4,000 if the economy is normal (40% probability) and

an NPV of $2000 if the economy is exceptionally weak (20% probability).

Options for ANSWER:-

i. 5600

ii. 5200

iii. 3500

iv. 4000

A firm spent $10 million to develop a product for market. In the product’s first two years, its profit was $6 million. Recently, there has been an influx of comparable products offered by competitors (imitators in the firm’s view). Now the firm is reassessing the product. If it drops the product, it can recover $2 million of its original investment by selling its production facility. If it continues to produce the product, its estimated revenues for successive two-year periods will be $5 million and $3 million and its costs will be $4 million and $2.5 million. (After four years, the profit potential of the product will be exhausted, and the plant will have zero resale value.) What is the firm’s best course of action?

A firm spent $10 million to develop a product for market. In the product’s first two years, its profit was $6 million. Recently, there has been an influx of comparable products offered by competitors (imitators in the firm’s view). Now the firm is reassessing the product. If it drops the product, it can recover $2 million of its original investment by selling its production facility. If it continues to produce the product, its estimated revenues for successive two-year periods will be $5 million and $3 million and its costs will be $4 million and $2.5 million. (After four years, the profit potential of the product will be exhausted, and the plant will have zero resale value.) What is the firm’s best course of action?

There is an investment opportunity set where the optimal risky portfolio O has expected rate of return of 12% and volatility( or standard deviation) of 25%, and T-bill yields a risk free rate of 2%. 

1. Investor A chooses to invest 75 % in the portfolio O and 25% in T-bill. Compute the expected return and volatility of her portfolio, and its Sharpe ratio. 

2. Investor B has an expected risk premium of 7% to the risk-free asset return with her portfolio. Compute the composition of her portfolio and its Sharpe ratio. 

3. Investor C has a volatility target of 20%. Compute the expected return and its Sharpe ratio. 

4. Draw a CAL line and mark Sharpe ratio and all investors’ asset allocation choices(A, B, C).

5.1  RESEARCH the concept of ‘direct selling’ and WRITE a summary covering the following:

5.1.1  The factors related to successfully developing, establishing and maintaining direct sales contacts between the buyer and the seller;

5.1.2  The factors related to organisation structure and method of operation of direct selling organisations;

The factors related to sales team organisation, training, motivation and incentives for direct selling organisations

 DISCUSS the relevance and responsiveness of direct sales for the banking environment (consider factors such as identification and qualification of prospective buyers, sales preparation, presentation, confirmation, follow-up and identification of further business opportunities).

 IDENTIFY at least two different direct sales techniques and EXPLAIN why these are better suited to different circumstances.

Why should the competitive environment be considered when evaluating personal selling strategies?