Fan Milk Ltd is about to undertake a project which requires initial investment of GH300,000. The expected cash inflows from year 1 to year 5 are GH80,000, GH100,000, GH110,000, GH80,500 and GH100,500 respectively. The required rate of return is 12%. Find the NPV of the project. Ans -

A project requires initial capital outlay of GH200,000. The project will provide an annual cash flow of GH60,000 for 10 years. The cost of capital is 22%. What is the profitability index. Ans-

You invested 50,000 in an export business and you expect to be in the business for 10 years. What is the minimum annual amount you should expect annually to remain in this business if your required rate of return is 25%. Ans

You invested 350,000 and expect to earn 120,000 at the end of year 2, 220,000 in year 3 and 150,000 in year 4. Calculate the IRR of the project. Required rate of return is 15%. Ans-

A project requires an initial investment of 40,000 and additional investment of 10,000 at the beginning of year 2. The project will end in year 5. The expected cash flows from the project are as follows, Year 1 10,000, Year 2 25,000, Year 3 40,000, Year 4 18,000 and Year 5 10,000. find the MIRR if the cost of capital is 15%. Ans-

A project requires initial capital outlay of GH300,000. The project will provide annual cash flow of GH80,000 for 5 years. What is the payback period? Ans-

A project requires GH100,000 investment and the expected cash flows from the project are as follows, Year 1 30,000, Year 2 35,000, Year 3 45,000, Year 4 65,000 and Year 5 70,000. What is the discounted payback? Ans-

A project requires GH250,000 investment and the expected cash flows from the project are as follows, Year 1 70,000, Year 2 80,000, Year 3 100,000, Year 4 90,000 and Year 5 75,000. Annual depreciation of 40,000 is charged and the salvage value is 60,000. Find ARR. Ans

Calculate the NPV of a project with initial capital outlay of 80,000 that will provide 25,000 annual cash inflows indefinitely. The required rate of return is 20%. Ans

The actual returns of company A for the past three months were 15%, 25%, -5% and that of company B were 18%, 24% and -1%.

Use this information to answer question 10 to 19

Calculate the expected return of company A using arithmetic average. Ans-

Calculate the expected standard deviation of company B. Ans-

Which of the two companies will you invest in? Ans

Find the covariance between the rates of return. Ans

Find the correlation coefficient between the rates of return. Ans

Find the expected portfolio return if you invest equally in the two companies. Ans

Find the weighted standard deviation of the portfolio Ans-

Find the standard deviation of the portfolio using the correlation coefficient found in Q(15). Ans-

At what correlation coefficient is the maximum risk reduction obtained from diversification? Ans

Calculate the expected return of company B using geometric average. Ans

Assume that the current risk-free rate is 14%, and that we expect the return on the GSE Composite Index to be 25%.

Use this information to answer question 20 to 24

Calculate the reward-to-risk in equilibrium. Ans

How much should asset A offer if its beta is 0.6? Ans

If the actual return for asset A is 25%, then asset A is *

(a) Correctly priced (b) Overpriced (c) Underpriced

How much should asset B offer if its beta is 1.4? Ans

If the actual return for asset B is 35%, then asset B is *

(a) underpriced (b) overpriced (c) correctly priced

One of the following can be considered an unsystematic risk *

currency risk (b) interest rate risk (c) inflation risk (d) business risk

Guiness Ghana made a decision to invest in new plant on 1st September, 2019. The decision was announced on 5th November,2019 to the general public. The share price of Guinness Ghana which was 3 Ghana cedis on 20th August changed to 3.50 on 5th November, 2019. This shows the market is *

(a) inefficient (b) strong form efficient (c) semi-strong efficient (d) weak efficient