Question
A. M LLC is evaluating some possible investment projects and uses a 10% discount rate to determine their net present values. Investment A Rs'000 Initial
A. M LLC is evaluating some possible investment projects and uses a 10% discount rate to determine their net present values.
Investment A
Rs'000
Initial Investment 500
Incremental cash flows:
Year 1 200
Year 2 150
Year 3 180
Year 4 200
Year 5* 100
*includes Rs. 20,000 residual value for each investment project. Calculate the Discounted payback period of investment A. (6 marks)
B. Colin has inherited $6,000 from the death of Grandma Anna. He would like to use this money to buy his mom Hayley a new scooter costing $7,000 two years from now. Will Colin have enough money to buy the gift if he deposits his money in an account paying 8 percent compounded bi-annually? (8 marks)
C. The Bank of England offers a special fixed deposit compound rate of 12% per annum. If the bank pays interest on a monthly basis and investor deposited $150,000 today calculate the value of the investment at the end of the 6th year. (6 marks)
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