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Case: Mr. Juan is in the auto parts business. He wants to have his own shop. He is planning to go to BPI this morning
Case: Mr. Juan is in the auto parts business. He wants to have his own shop. He is planning to go to BPI this morning to apply for a housing loan at a fixing rate of 10 years. BPI is requiring an investment equity of P20000.00 for the loan and Mr. Juan already prepared the amount. With the new property, Mr. Juan will generate the following income net of the bank loan interest he has to pay: Year 1-P1000.00; Year 2-P4,000.00; Year 3-P8000.00; Year 4-P7000.00; Year 5 P5000.00. Mr. Juan is excited about his project. But before, he was able to go to BPI, Mr. Pedro came over to Mr. Juan and proposed an investment project. Mr. Pedro wants Mr. Juan to invest P40000.00 and promised the following cash flow to Mr. Juan: Year 1 - P10000.00; Year 2 - P10000.00; Year 3 -P16000.00; Year 4 - P4000.00; Year 5 - P28000.00. Mr. Pedro is excited for Mr. Juan because of the opportunity for big sums of cash. You are the adviser to Mr. Juan and he asks your professional advice. He knows you graduated with a degree of Business Management/Business Accounting from the Academic Center of STI. Requirements: 2. 1. Compute for cash surplus on Project 1 and Project 2. What discount rate should you use for Project 2 and why? 3. Compute for Net Present Value of Project 1. 4. Show computations. Case: Mr. Juan is in the auto parts business. He wants to have his own shop. He is planning to go to BPI this morning to apply for a housing loan at a fixing rate of 10 years. BPI is requiring an investment equity of P20000.00 for the loan and Mr. Juan already prepared the amount. With the new property, Mr. Juan will generate the following income net of the bank loan interest he has to pay: Year 1-P1000.00; Year 2-P4,000.00; Year 3-P8000.00; Year 4-P7000.00; Year 5 P5000.00. Mr. Juan is excited about his project. But before, he was able to go to BPI, Mr. Pedro came over to Mr. Juan and proposed an investment project. Mr. Pedro wants Mr. Juan to invest P40000.00 and promised the following cash flow to Mr. Juan: Year 1 - P10000.00; Year 2 - P10000.00; Year 3 -P16000.00; Year 4 - P4000.00; Year 5 - P28000.00. Mr. Pedro is excited for Mr. Juan because of the opportunity for big sums of cash. You are the adviser to Mr. Juan and he asks your professional advice. He knows you graduated with a degree of Business Management/Business Accounting from the Academic Center of STI. Requirements: 2. 1. Compute for cash surplus on Project 1 and Project 2. What discount rate should you use for Project 2 and why? 3. Compute for Net Present Value of Project 1. 4. Show computations
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