Question
Please help me understand the below question QUESTION THREE 3.1 Your parents set up a trust fund for you 18 years ago that is now
Please help me understand the below question
QUESTION THREE
3.1 Your parents set up a trust fund for you 18 years ago that is now worth R32 786,51. If the fund (5 marks) earned 6% per year, how much did your parents invest? Suppose you are offered an investment that will allow you to double your money in 8 years. You have R10 000 to invest. What is the implied rate of interest? 3.2 (7 marks) Suppose you have a 1-year old daughter and you want to provide R81 000 in 19 years towards her college education. You currently have R2 000 to invest. What interest rate must you earn to have the R81 000 when you need it? 3.3 (7 marks) Suppose you want to buy a new house. You currently have R15 000 and you figure you need to have a 10% down payment plus an additional 5% of the loan amount in closing costs. If the type of house you want costs about R150 000 and you can earn 8.1% per year, how long will it be before you have enough money for the down payment and closing costs? 3.4 (6 marks)
QUESTION FOUR
INFORMATION The management of SARB Limited must choose between two projects to expand their business operations. The two projects are called Project FIC and Project PA. Each project requires an initial investment of R250 000. No scrap values are expected. You have been presented with the following information: PROJECT FIC Project FIC has net cash inflows of R63000 for each of the five years of the projects lifespan. PROJECT PA Project PA is a five-year project with annual profit of R8000, R18000, R12000, R20000 and R7000 for years one to five respectively. The required rate of return is 15%. Depreciation is calculated using the straight-line method. REQUIRED Use the information provided above to calculate the following: 4.1 Payback Period of Project PA (answer expressed in years, months and days). (4 marks) 4.2 Net Present Value of Project PA. (Round off amounts to the nearest Rand.) (5 marks) 4.3 Accounting Rate of Return of Project PA (answer rounded off to 2 decimal places). (5 marks) 4.4 Discuss five advantages of the Accounting Rate of Return (5 marks) 4.5 Internal Rate of Return of Project FIC (answer rounded off to 2 decimal places). (6 marks)
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