Question 1 (4 marks)

Khaled is a professional football player in UAE. Aljazeera Club is negotiating with him to join the club. The Club presented two offers to Khaled; the first one is to pay him a big bonus on the signing day of the contractand smaller payments in the future, or a small amount now and bigger payments in the future.

1.Which option should Khaled accept and why? (2 marks)

2.What about Aljazeera Club, which option is better for them? (2 marks)

Question 2 (6 marks)

Red-Star Co. wants to sell an electrical generator for AED 165,000 in 2024. The price of this generator in the market today is AED 94,000 (according to GE company who is the producer of this generator). If the discount rate on this generator is 9.5 percent per year.

1.Do you think the firm will make a profit if they sell this generator? (4 marks)

2.What is the rate that will make the firm breakeven? (2 marks)

Note: Profit = Revenue -cost

Question 3 (10 marks)

Your uncle Mohammed is celebrating his 33^th birthday today and wants to start saving for his retirement at the age of 63. He wants to be able to withdraw AED 100,000 from his saving account on each birthday for 20 years following his retirement. The first withdraw will be on his 64^th birthday. Your uncle intends to invest his money in a local bank in Abu Dhabi that offers 7% interest rate per year. He wants to make equal payments on each birthday into the account established in the local bank for his retirement fund.

1.If your uncle starts making these deposits on his 33^th birthday and continues to make deposits until he is 63, what amount must he deposit annually to be able to make the desired withdrawals at retirement? (4 marks)

2.If your uncle has just inherited a large sum of money, so instead of making equal payments, he has decided to pay one lump sum payment on his 33^th birthday to cover his retirement needs. What amount does he have to deposit? (2 marks)

3.If your uncle's employer informs your uncle that he will contribute AED 1,000 to your uncle account every year. Also, if your uncle expects AED100,000 from another investment on his 53^th birthday, which he will also put into the retirement account. What amount must he deposit annually now to be able to make the desired withdrawals at retirement. (4 marks)

Note: The use of a timeline will help you to solve this problem.