QUESTION 1:

Amman Company is planning to invest in a project. The following are the available projects available to the company to invest in.

Below table shows the interest rates per each project:

projects annual interest rates interest compounding

1 15% daily

2 15.5% quarterly

3 16% annually

The CEO of the company could not decide on which interest rate will yield to maximum return on investments. Therefore, the CEO asked you to recommend the best project to invest in according to the best interest yield.

QUESTION 2:

Irbid Company is planning to acquire a new asset. The company can either buy the asset or can lease the asset on a three-year loan. The cost of the new asset when buying is JOD 32,000. The asset can be leased by paying JOD 99 today and JOD 450 per month for the next three years. If the company purchase the new asset, the company will pay it off in monthly payments over the next three years at 6% Annual Percentage Rate. The financial manager believes that the new asset can be sold for JOD 23,000 in three years. Should the company buy or lease the new asset?

QUESTION 3:

Zara Company is planning to invest in one of the following projects. You are a financial analyst at the company, and you are recommending whether the company should invest in Project A or Project B. Your CEO has proposed each of the two projects, but the company can only invest in creating one of them this year, and so your CEO wants you to give an advice on which one to invest in.

The company's expected return is 10%.

years project A cash flows project B cashflows

0 3,000,000 JOD 3,000,000

1 2,000,000 0

2 4,000,000 0

3 4,000,000 0

4 2,000,000 0

5 0 14,000,000

Project A starts with an initial investment, followed by a growing income stream, until the project becomes obsolete and is terminated.

Project B starts with an initial investment and makes no sales, but the whole project is expected to achieve profits in five years. Both project carry the same risk.