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2. Using an interest rate of 7%, calculate the present value of OMR 300 to be received in (a) one year, (b) five years, and
2. Using an interest rate of 7%, calculate the present value of OMR 300 to be received in (a) one year, (b) five years, and (c) ten years. Answer: 3. Ahmed plans to purchase a one-year government bonds. The bonds will pay the holder OMR 1,000 in one year. If Ahmed requires a return of at least 2% on such an investment, what is the most he will be willing to pay for the Bond? 4. Mahsa is considering quitting her job to start a bakery, her dream work. To do so, she would need to make an investment of OMR 80,000 today. She estimates that the bakery would generate revenues of OMR 90,000 over the next five years and would require OMR 20,000 in expenses. At his current job she earns OMR 50,000. Therefore, Mahsa estimates that the incremental cash flows from opening the bakery would be OMR 20,000 per year for the next five years. Calculate the NPV of the business using a discount rate of 15%. Should Mahsa quit her job and start the bakery? Answer: 5. If Mahsa instead invests an additional OMR 5,000 in ner equipment and upgrades for the bakery each year, the bakery will remain operational and generate net cash flows of OMR 15,000 into perpetuity. Given the same initial investment of OMR 80,000 and discount rate of 15%, calculate the NPV of opening the bakery. Should Mahsa quit her job and start the bakery? 6. Jokha is saving for a OMR 30,000 down payment on a house. She can earn 6% interest on her savings and sets aside OMR 15,000 today. How long will it take for these savings to grow enough to make the down payment? 7. Reza buys a scratch-off ticket every day and today he hits it big with a OMR 100,000 winning ticket. But when he turns in his ticket, he's informed of the fine print that states the OMR 100,000 is payable in annual instalments of OMR 10,000 per year over the next 10 years. If he wants a lump sum today, he will only get OMR 85,000. If the interest rate is 5%, is it better for Reza to take the ten OMR 10,000 annual instalments or the OMR 85,000 lump sum
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