Exercises: 1. The following table shows the revenues(inflows) and the expenses (outflows) of a certain project for 5 years investment in this computer is economically feasible if the prevailing interest rate is 11%? 6. The following table shows the net annual inflows from a project throughout its 5 year life: 0 1 2 3 4 5 50 4 0 60 80 110 140 170 Years Original investment Expenses (Costs) Revenues (Sales) Inflow Year 1 2 3 5 Net annual inflows 500 1500 3000 5000 7500 Calculate the current value of the net annual inflows if the original investment Io = 10000 mu, the number of years of the project is n= 5 and the interest rate is j = 9%. Can this project be considered as profitable? 0 80 105 140 185 230 -50 20 25 30 45 60 1/(1.08)2= 1/(1.08)3= | 1/(1.08)= 1/(1.08)== C of 1 1/(1+i)= 1/(1.08)1= Actualization a 7. The initial investment in a factory is 31 million mu and its maximum production capacity is 20000 tons per year. What is the break-even point of this factory if: i. Maximum production capacity = 20000 tons. ii. Total variable cost = 10925000 mu. 111. Variable cost per unit = 10925000 - 20000 = 546.25 mu iv. Fixed cost = 2855000. V. Sales price = 800 per ton. b. What is the effect on profitability of this factory if it was operating at full capacity? a. Calculate the current value of the future revenues throughout the life of the project at the interest rate of 8%. b. Is this considered a feasible project? 2. The original investment in a project is Io = 350000 mu and it is expected to bring in an annual amount of F = 55000. If the interest rate is 12% can this project be considered as feasible it its lasts for n = 12 or n = 20 years? 3. A company had 2 choices: a. Project A demands an initial investment of 600000 mu and provides a net annual inflow of 98000 mu for 10 years. b. Project B demands an initial investment of 750000 mu and provides a net annual inflow of 140000 mu for 10 years if the prevailing interest rate is 12% which project will the company choose? 4. An entrepreneur bought a machine for his factory and agreed with the supplier of this machine to pay it in six years at 5000 mu per year. He expected to get an annual net inflow of 3440 mu for 10 years. The prevailing interest rate is 10% per year. Can we consider that this investment is profitable? 5. A company bought a computer for 10000 mu cash and paid the rest of the value of this computer on 5 equal annual instalments of 8000 mu. The expected to receive additional revenues of 6500 mu per year for 12 years. Can we consider that the