QUESTION 4 (25 MARKS) Donald has heard about the Time Value of Money which is used to calculate present and future value of money. He has a number of queries on several monetary transactions which he is contemplating. (Formula and interest rate factors are provided for this question). You are required to advise him on the following situations: (0) How much he will receive if Rs4,600 is deposited today at 9 % for three years, out of his private funds. (2 marks) (ii) How much he must invest today if he anticipates to receive Rs89,000 in 15 years, assuming an opportunity cost of 14 %. (2 marks) (ii) He has deposited Rs33,000 today in an account which will earn 5 % semi-annually. He plans to leave the funds in this account for seven years earning interest. If the goal of this deposit is to cover a future obligation of Rs70,000, what recommendation would you make to Donald? (6 marks) (iv) Donald is preparing a five-year plan for his business. Today, sales are Rs1,000,000. If the growth rate in sales is projected to be 10 % over the next five years, what will the dollar amount of sales be in year five? (2 marks) (v) Donald intends to deposit Rs5,000 each year for eight years, at 6 % per year. He wants to know of the future value of the annuity. (2 marks) (vi) A computer dealer offers to lease a system to Donald for Rs50 per month for two years. At the end of two years, Donald has the option to buy the system for Rs500. Donald will pay at the end of each month. The computer dealer also offers to sell the same system to Donald for Rs1,200 cash, now. If the current interest rate is 12 %, which is the better offer? (11 marks)