Finance Answers

Org Pvt. Ltd. is considering two mutually exclusive capital investments. The project’s

Expected cash flows

year

Project A

Project B

0

-400

-575

1

95

150

2

110

200

3

118

250

4

125

275

5

140

230

6

150

180

expected net cash flows are as follows:

a. If you were told that each project’s cost of capital was 10%, which project should be

selected using the NPV criteria?

b. What is each project’s IRR?

c. What is the regular payback period for these two projects?

d. What is the profitability index for each project if the cost of capital is 12%?

Flare Stock will pay the dividend of $2.4 this year. Its dividend yield is 10%. At what price is the stock selling?

Assume that your father is now 55 years old and plans to retire after 5 years from now. 

He is expected to live for another 15 years after retirement. He wants a fixed retirement 

income of Rs. 1,00,000 per annum. His retirement income will begin the day he retires, 

5 years from today, and then he will get 14 additional payments annually. He expects to 

earn a return on his savings @ 10% p.a., annually compounding. How much (to the 

nearest of rupee) must your father save today to meet his retirement goal?

Explain different types of money market instruments. In each of the below cases,which money market instruments would you recommend and why?   

a) A mutual fund manager has INR 450 million of cash, which he needs to park for a period of less than 180 days, where he will move this to equity

b) An oil refining company wishes to borrow INR 1500million for a period of 90 days to fund its settlement of invoices

Calculate the price on its issue date of 100000 face value 90 day commercial paper issued by GE capital Canada if the prevailing market rate of return is 1.932%

Background about public sector wage bill in South Africa

Suppose you are interested in examining the effect of 𝑥 on 𝑦. The sample covers the period of 𝑡 = 1, 2, 3, … , 𝑛.

a) Suggest a research question and write the linear regression model that you would estimate. Define the variables.

b) State a hypothesis that you can test for the slope coefficient. Explain all the steps and assumptions.

c) Explain, in your own words, what you understand about using historical data for predictions. Relate your answer to the research question and model in (a).

d) What is a Type I error? How is it related to the level of significance? Use the information in (c) to explain.

b) A government bond that originally cost $5000 with a yield of 6% (simple interest) has 5 years left before redemption.

i. Determine its present value if the prevailing rate of interest is 10%. Briefly explain the steps in your own words.

ii. Is it worth purchasing this bond? Provide your own reasoning.

Cost of debt

Finance markets do not include which of the following?

Banks

Stock Markets

Government Regulatory Agencies

Nonprofit Organizations