Calculate the monthly payment

Reference no: EM133127855

Fundamentals of Finance

Assignment tasks:

TASK ONE
"The recognition of the time value of money and risk is crucial in financial decision making"

(a) Shares in Farm Plc currently sell for $1175 and will be worth $ 1450 in 3.5 years. Calculate the rate of return.

(b) Mr Robert is planning for his retirement in the years to come when he will reach 55. He wants to spend $11500 at the end of each year during his retirement period which he has estimated to be 20 years. Assuming a rate of interest of 7% per annum, calculate the lump sum he has to save by the age of 55.

(c) NCB Ltd has made an interesting offer on loans for all first time buyers of a house having the following particulars:

Loan amount: Rs 1,200,000
Rate of interest: 5.4% per annum (Annualised Percentage Rate) Maturity period: 22 years

Calculate the monthly payment.

TASK TWO

The directors of Marvel Ltd are currently considering investment in a particular project. Two projects, Silver (S) and Gold (G), with the following cash flows are to be considered.

Assume a cost of capital of 6% per annum.

Year	Project S Cash Flows $	Project G Cash Flows $
0	-1200	-1100
1	600	400
2	500	350
3	400	450

200

500

(a) Calculate the following for both projects:

1. Payback period
2. Net Present Value
3. Discounted payback
4. Internal Rate of Return
5. Profitability Index

TASK THREE
As a finance specialist, you have been approached by Groove Limited, a firm producing masks to consider the pros and cons of different finance options.

In not more than 800 words, write a report to the management of Groove Limited to justify your arguments.

Reference no: EM133127855

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