QUESTION 4 (25 Marks)

Project Financial Management

4.1 You want to begin saving for your daughters college education and you estimate that she will need R240 000 in17 years. If you feel confident that you can earn 7.5% per year, how much do you need to invest today?(6)

4.2 Suppose your company expects to increase unit sales of widgets by 14% per year for the next 8 years. If you currently sell 2.5 million widgets in one year, how many widgets do you expect to sell in 6 years?(6)

4.3 You are looking at an investment that will pay R1 800 in 3 years if you invest R400 today. What is the implied rate of interest?(8)

4.4 You want to purchase a new car and you are willing to pay R500 000. If you can invest at 14% per year and you currently have R350 000, how long will it be before you have enough money to pay cash for the car?(5)