2. Time value of money: 13 marks You have inherited $50,000 from your Great Aunt Daisy. You have determined that you have two different investment opportunities available to you. The money can be placed on deposit at the bank. The interest rate you can earn is 6% compounded annually. Alternatively, you can invest in a business opportunity with Limas bakery and receive the following cash flows (note: the cashflows are received at the end of each year): Years 1-2 $10,000 each year Years 3-4 $12,000 each year Year 5 $22,000 Required: (a) Work out the present value of the investment at the bank and the present value of the business opportunity with Limas bakery using a discount rate of 6% p.a. (6 marks) (b) (i) Based on your present value analysis, which investment represents the better opportunity? Why? (1 mark 50 words maximum) (ii) Explain why using 6% to calculate the present value of Limas bakery opportunity may not be realistic. (2 marks 80 words maximum) (iii) Discuss two other factors you would consider before making your final decision. (2 marks 80 words maximum) (5 marks) (c) Discuss how inflation affects your required rate of return.