1. Investment Decision Rules: NPV, IRR, Payback, Discounted Payback. What is the NPV, IRR, payback period, and discounted payback period of a project that requires $1,000 investment today, additional $500 investment in year one, and brings the perpetual cash flow of $200 per year starting in year two, if the opportunity cost of capital is 10% per year.
2. (30 min) Mortgage. You buy an apartment costing 50 million tenge under the 7-20-25 mortgage program. The mortgages under this program require 20% down payment, have 25 year term, and carry fixed 7% interest (APR with monthly compounding). You do not intend to live in the apartment; instead, you bought it as an investment and immediately after the purchase rent it out to a tenant. The tenant pays fixed monthly rent of 200,000 tenge (payable at the beginning of each month) and is also required to provide a security deposit in the amount of three monthly rents upon signing the rental contract. After ten years, you sell the apartment for 100 million tenge, repay the mortgage balance in full, and return the security deposit to the tenant. There are no taxes.
3. 1. (20 min) What is the annualized compound return on your investment? (This question is best to be solved in Excel
5. 2. (10 min) Your alternative is to invest in S&P500 index. Assume you can invest at zero cost, the dollar appreciates against tenge 6% per year, and the average S&P500 return is 8% per year. Calculate the average annual tenge return on this investment. Is this investment better than buying an apartment? Discuss financial as well non-financial aspects.