Finance Answers

What does the Credit Manager can recommend to a dummy applicant in the bank?

You are working with the manager of an irrigation facility who is interested in installing

a more efficient pumping system. The proposed system costs $15,000 and you project

that it will reduce the annual utility costs by $2,000. After five years, you expect to

upgrade the system for $4,000. This upgrade is expected to further reduce utility costs by

$1,000 annually. The annual effective interest rate is 7% and the life of the system, after

upgrade is 50 years. What is the Present Value of the investment in the system?

A flood control district can construct several alternative control works to alleviate

flooding. These alternatives include the construction of dam A, dam B, and a system of

levees C. Each of these works can be built to function alone or together with any other or

all other projects. Thus we have a possibility of the following combinations: ABC, A, B,

C, AB, AC, and BC. The life of each dam is 80 years and the life of the levee system is

60 years. The cost of capital is 4%. Information on total investment, operation and

maintenance costs, and average annual flood damages is given in the table. Which flood

control undertaking is the most economical using incremental cost-benefit analysis?

a friend of your just invested in an outstanding bond with a 4% annual coupon and a remaining maturity of 5 years. the bond has a per value og $500 and the market interest rate is currently 7%. how much did your friend pay for the bond? is it par, premium or discount bond?

How does a Credit Manager treat and decide a dummy credit application?

In a given credit application, assume that the credit manager, upon investigation, found out that indeed it is a dummy application. The credit applicant himself does not enjoy an A-1 credit rating although he may not be totally unacceptable credit-wise. But the accommodating party is established to be a very good credit risk. Having full knowledge of these facts, should a credit manager approve or disapprove the credit application?

A newly formed beverage company, moderately capitalized, has purchased 40 units of delivery trucks from a motor vehicle dealer.  The total value of the trucks amounted to P1,350,000.    The local bodies built at the expense of the buyer was valued at P500,000.   The buyer made an initial down payment of P250,000 and mortised the balance, with finance charged for 36 monthly instalments.

Kabelo is employed at a local financial institution as a financial analyst. He finds that all the securities analyzed have estimated values higher than their market prices. The securities appear to be?

1. The ABC bank has a deposit base on which it holds excess reserves of $42 Million at a reserve rate which relates to a money multiplier (MM) of 5. On January 2, 2010 Mwen-Mwen, a customer of ABC bank issued a $20 Million check drawn on its account, to Bushrod Manufacturing Company (BMC), which it deposited into its account with Satiah Bank.