1. Jerome and Jewel Jones are looking to buy their family home for their burgeoning brood. They are looking for a five-bedroom house. The average price of a five- bedroom house is GH450,000 in their locality. A bank offers the couple a 15- year mortgage facility at an interest rate of 24.5%. The bank also requires that the instalment payments do not exceed 30% of the couples monthly income. What should be the couples combined monthly income if they wish to take the facility?

2. You are willing to pay GH15,625 now to purchase a perpetuity that will pay you and your heirs GH1,250 each year, forever, starting at the end of this year. If your required rate of return does not change, how much would you be willing to pay if this were a 20-year, annual payment, annuity instead of a perpetuity?

3. Desmodus Limited, a toy maker, prepares its accounts to 31 December each year. For the 2017 financial year the company paid a dividend of GH0.55 per share. Dividends paid are paid at the end of year but the 2017 were 80% lower than that of the previous year due to a difficult financial year. Members of the com- pany at its annual general meeting agreed not to pay dividends over the next two years and instead pay down the companys bonds. Dividend payment will resume thereafter at the level of the 2017 dividends for three years. Management be- lieves that the company can afford to increase dividends at a rate of 4% thereafter for the foreseeable future. What is the intrinsic value of the companys shares at the start of 2019 financial year if firms in the toy industry deliver returns of 13.5% on average?

4. YouhavejustjoinedtheMaaretsGroup,andyourbossasksyoutoreviewarecent analysis that was done to compare three alternative proposals to enhance the firms manufacturing facility. You find that the prior analysis ranked the proposals according to their IRR, and recommended the highest IRR option, Proposal A. You are concerned and decide to redo the analysis using NPV to determine whether this recommendation was appropriate. But while you are confident the IRRs were computed correctly, it seems that some of the underlying data regarding the cash flows that were estimated for each proposal was not included in the report. Here is the information you have, all amounts in millions of GH o.:

PROPOSAL	IRR	YEAR 1	YEAR 2	YEAR 3	YEAR 4
A	60%	-100	30	153	88
B	55%	?	0	206	95
C	50%	-100	37	0	204+?

(a) Which projects would recommend based on the NPV of each proposal if the appropriate cost of capital is 10%?

(b) Would your recommendations be valid if the company has capital limitation of GH285 million? Explain your with appropriate detail.