Finance Answers

The following question describes the conversion of cash flow into an equivalent equal payment series with N = 10

A = [800+200(A/G, 6%, 7)] (P/A, 6%, 10) + [300(F/A, 6%, 3) – 500] (A/F, 6%, 10)

Given the equation, reconstruct the original cash flow diagram and calculate the value of A

Suppose your retirement benefits during your first year of retirement are 50,000.00 Assume that this amount is just enough to meet your cost of living during the first year. However, your cost of living is expected to increase at an annual rate of 5% due to inflation. Suppose you do not expect to receive any cost of living adjustment in your retirement pension. Then, some of your future cost of living has to come from your savings other than retirement pension. If your saving account earns 7% interest a year, how much should you set aside in order to meet this future increase in cost of living over 25 years and how much should you save each year if you will retire after 10 years?

Q.

On 31st December, 2012, the bank column of TNT's cash book showed a debit balance of RM1,500. The monthly bank statement written-up to 31st December, 2012 showed a credit balance of RM2,950.

On checking the cash book with the bank statement, it was discovered that the following transactions had not been entered in the Cash Book:

i) Dividend of RM240 had been paid directly to the bank.

ii) A credit transfer - customs and Excise refund of RM260 - had been collected by the bank.

iv) A direct debit of RM70 for the AVON subscription had been paid by the bank.

v) A standing order of RM200 for TNT's loan repayment had been paid by the bank.

vi) TNT's deposit account balance of RM1,400 was transferred into his bank current account.

ii) Cash of RM90 and cheques amounted RM600 had been paid to the bank on 31st December, 2012 but were not credited by the bank until 2nd January, 2013.

required:

a) update the Cash Book (Bank Colum).

b) Prepare a Bank Reconciliation Statement

What is the value of the expenditure multiplayer

What are the primary financial markets? Why is it critically important for the effective operation of the primary markets to have well-developed secondary markets where investors can trade with confidence?

4.3 REQUIRED

Study the information given below and answer the following questions:

4.3.1 Calculate the net present value. (7)

4.3.2 Should ABC Limited consider acquiring the machine? Explain. (1)

4.3.3 Calculate the value of the initial investment at the end of five years, if it is

invested at a rate of 12%.

(2)

INFORMATION

The project manager of ABC Limited is contemplating the import of a machine in order to expand

the production capacity at one of its projects. The estimated cost of the machine is R500 000 and

the revenues from the sales it is expected to generate are R350 000 per year for four years. The

cash costs associated with the project are estimated at R150 000 per year. The machine is

expected to have a scrap value of R50 000. The cost of capital is 12%.

4.2 REQUIRED

Study the information given below and answer the following questions:

4.2.1 Calculate the project’s Internal Rate of Return (answer expressed to two

decimal places).

(6)

4.2.2 Should the company consider investing in the project? Why? (1)

INFORMATION

Demat Limited is considering an investment in a project that costs R260 000 and should result in

cash savings of R81 000 per year for five years. The company’s cost of capital is 15%.

Calculate the following from the information given below:

4.1.1 Payback Period (expressed in years). (3)

4.1.2 Return on investment (expressed to two decimal places). (5)

INFORMATION

Tridev Limited intends investing in a new project. The following details relate to one of the

projects it can choose from:

Initial cost R400 000

Expected useful life 4 years

Scrap value 0

Depreciation per year R100 000

Minimum required rate of return 14%

Expected net cash flows: R

End of Year 1 110 000

Year 2 120 000

Year 3 125 000

Year 4 160 000