Question
Mr. Ali is the CEO of Fiditzi Construction company and they have an allotted budget for project which is 1,000,000 R.O. Projects in different places
Mr. Ali is the CEO of Fiditzi Construction company and they have an allotted budget for project which is 1,000,000 R.O. Projects in different places in Oman are projected to show the following cash inflows per year:
Year | Project in Muscat | Project in Ibri | Project in Salalah | Project in Shinas |
Year 1 | 200,000 | 400,000 | 150,000 | 480,000 |
Year 2 | 400,000 | 300,000 | 200,000 | 570,000 |
Year 3 | 500,000 | 600,000 | 100,000 | 600,000 |
Year 4 | 400,000 | 500,000 | 400,000 | 200,000 |
Year 5 | 300,000 | 300,000 | 500,000 | 100,000 |
Assume that Mr. Ali will apply loan to the bank to finance the 1,000,000 investment fund and New Bank offered a rate of 6% interest rate payable in 5 years, while Old Bank offered 6.5% payable in 9 years.
Mr. Ali wanted to know the Total present value of cash inflows of the Project in Salalah at 6% discount rate with discount factors for five years are 0.943, 0.890, 0.839, 0.7921 and 0.7473 respectively?
Mr. Ali wanted to know which project is to be selected on the basis net present value of cash inflows in comparison to Muscat and Shinas at 6% discount rate with discount factors for five years are 0.943, 0.890, 0.839, 0.7921 and 0.7473 respectively?
Mr. Ali wanted to know the Total present value of cash inflows of the Project in IBRI at 6% discount rate with discount factors for five years are 0.943, 0.890, 0.839, 0.7921 and 0.7473 respectively?
Mr. Ali wanted to know net present value of cash inflows of the Project in Salalah at 6% discount rate with discount factors for five years are 0.943, 0.890, 0.839, 0.7921 and 0.7473 respectively?
What is the payback period for project Salalah?
What is the future value of the loan if Ali will choose the offer of Old Bank using simple interest?
Under the internal rate of return technique a decision is acceptable when?
How much is the interest if the New Bank will use simple interest annually for 5 years.
Based on the loan application of Mr. Ali, it showed that the future value is:
a.
Decreasing as period of loan increases
b.
Decreasing as the rate of interest is increasing.
c.
Did not change even if the period of loan increases.
d.
Increasing as the period of loan increases
What is the future value of the loan if Ali will choose the offer of New Bank using compound interest?
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