Reference no: EM132476420
Fundamentals of Finance - Open University of Mauritius
Assignment
Part A
Excelsior Limited has the intention to purchase a new photocopying machine and has a choice between the following two machines:
|
ASUS
|
XEROX
|
Initial cost
|
Rs 120 000
|
Rs 120 000
|
Expected economic life
|
5 years
|
5 years
|
Expected disposal/residual value
|
Rs12 500
|
0
|
Expected net cash inflows
|
Rs
|
Rs
|
End of: Year 1
|
-
|
35 000
|
Year 2
|
48 000
|
35 000
|
Year 3
|
37 000
|
35 000
|
Year 4
|
39 000
|
35 000
|
Year 5
|
31 000
|
35 000
|
The company estimates that its cost of capital is 9%.
Required:
Q1: Calculate the payback period for both machines. (answers must be expressed in years, months and days)
Q2: Calculate the discounted payback period for both machines (answers in years, months and days)
Q3: Calculate the net present value for both machines. (to the nearest Rupee)
Q4: the Profitability Index for Machine ASUX.
Q5: Calculate the Internal Rate of Return for both machines (Use interpolation to arrive at your final answer.)
Q6: Write a brief report to the management to determine whether the company should buy any photocopying machine.
Part B
Q1: Mr Bruce deposits Rs 500 every month for 10 years in his saving account paying 8 % interest per annum. He wants to determine how much sum of money he will have at the end of the 10th year if interest rate is compounded :
i) Annually
ii) Quarterly
Q1: Mr Willis would like to save a sum of money for his newborn son's college education. How much must he deposit in a savings account now if the account grows at a rate of 7% a year and he desires a balance of Rs1,200,000 eighteen years from now?
Part C
"Finance is crucial....."
With reference to a business of your choice, evaluate the validity of the above statement.
Business Economics
Question 1.
(i) The demand and supply functions for a good are given by
D = 50 - 0.5P and S = 20 + 0.25P (Where P is price)
Q1: Calculate quantity demanded when price is Rs 10
Q2: Calculate quantity supplied when price is Rs 20
Q3: Calculate the equilibrium prices and quantities.
Q4: Calculate the shortage/ surplus if government imposes a regulatory price of Rs 60.
Q5: If the demand curve shifts to D′ = 100 - 0.5P, compute the new equilibrium price and quantity.
(ii)
Q1: With the aid of examples, explain and illustrate price elasticity of demand and income elasticity of demand.
Q2: Using these concepts explain and comment on measures which might be taken to increase the revenue of a typical small business in your country.
Question 2.
Compare perfect competition and monopoly in respect of price, output and profits.