Q1. Mechanics of Valuation:

a)If you invest your money (100,000) in a saving account with 10% annual interest rate what will be the Effective annual rate if interests are paid on monthly basis.

b)How much must you save at the end of each of the next 10 years to have Rs.100,000 at the end of the 10th year if the interest rate is 10%?

c)You borrow Rs. 1,000 and promises to repay Rs. 2,000. If you want to pay a 5% return on your loan, within how many years you must pay back?

Q2. Mechanics of Valuation:

a)How much money must you deposit in a savings account today to have Rs. 20,000 in 20 years if the interest rate is 8% compounded annually?

b)If the discount rate is 14%, what is PV10 of Rs.300 received at the end of each of the next 10 years except for the fourth year?

c)If a person would receive $10,000 in perpetuity and the interest rate is 10%, what would be the present value?

Q.4 Three years ago, your firm purchased a Machine for Rs.52, 000. It is being depreciated straight line to a salvage value of Rs. 2,000 in two more years. If your firm sells the Machine today for Rs. 22,500, it will receive only Rs. 21,150 after taxes.

a.What is the annual depreciation on the machine?

b.What is the current book value of the machine?

c.What is your firm's marginal tax rate?