Question 4. A UK investor has identified two investment projects in Ghana, Menswear and Womenswear. Each of the projects requires start-up capital of 50,000.00 respectively. The project will use machine apparatus and conveyance trucks at a cost of 10,000 in the production and distribution of the products. The remainder will be used as working capital. The projects are expected to have four years life-span, after the company will be sold at the Ghana Stock Exchange Market. The project will start from December 2018. All estimated cash-flow are to be repatriated to the UK at a hedged fixed exchange rate of GH45.00 to 1.00 at end of each year. Project Menswear Womenswear Initial Capital (50,000) (50,000) Cash-flow Cash-flow GH GH Year 100,000.00 150,000.00 Year 2 150,000.00 90,000.00 Year3 50,000.00 80,000.00 Year 4 22,000.00 30,000.00 Required: (a) i. Calculate the Discounted cash flow for each of the project for the investor. (Marks) ii. Pay-back period for each of the project. (3Marks) iii. State the project which should be accepted base on the recovery period. (3Marks) iv. Compute the amount in cedis as the initial capital for the investment, using the hedged rate as illustrated in question. (2Marks) (b) Assuming that in the UK the annual accounting rate of return is 10%. Calculate the annual return on the capital to be invested in each of the projects respectively. (1Marks) Question 2. (a). Assuming that the value of the Ghanaian cedi (GHC1.00) as at today is equal to $0.4100, two days ago, the value of the GHCH.00 was equal to $0.3800. Required: (1) Calculate the percentage change of the dollar in cedis for this period (2Marks). (ii) Explain two (2) factors that could have accounted for this change (2Marks) (b) A summary of the following transactions appear in the current account of the balance payment of a hypothetical European country Details Dr '000 Cr '000 5,000 200 1,000 Exported goods Exported services Incomes from abroad Imported goods Imported services Transfers to foreign countries Total 4,000 1,000 $50 5,550 6,200 Required: (1) Compute, if any surplus or deficits balance on the balance of payment account (3Marks). (ii) State four components of the capital account of balance of payment account (4Marks). (iii) List four transactions of current account of the balance of payment account (4Marks). Question 1: (a). A Canadian Company with subsidiary in Ghana uses the year-end exchange rate to covert its overseas profit from the financial statements. The profit forecasts by Canadian Investment Analysts for each financial year is CAD 120m, based on forecast Canada profit of CAD 60m, and forecast profit of the subsidiary in Ghana is GHe 190m. Forecast exchange rates at year end are GH4.500 - CAD 1.00. GH5.500- CAD 1.00. GH6.00 - CAD 1.00 Required: 1. Calculate the group total profit by each year-end rate (6Marks) ii. Assuming that the Ghanaian currency exchange rate is pegged to the value of the Canadian Dollar (CAD), how would the cedi behave along with the Canadian Dollar (CAD)? Question 4 (a). A borrower entered a bank and borrows GH 100.000.000 at an interest rate of 15%. He intends to pay a supplier in the USA. The prevailing exchange rate of the Ghanaian cedi was GHe 2.00 - $7.00, ar that time Require: i. Calculate the amount payable as interest on the loan to the lending bank (4Marks) ii. Calculate in dollars the amount payable to the USA supplier (4Marks) (b). Sape & Son, a Ghanaian importer has entered an agreement on January 1" 2017 to be supplied goods with the value of GH 2,000,000.00 by a UK manufacturer. The contract attracted twenty percent (20%) interest for late payment after the date of the agreement. The following rates apply to the contract: Spor rate GHE 2.50 Forwarderite Glle 2.00 1,00 Require: i. Calculate the amount payable if the Ghanaian dealer has paid the supplier on the day of the contract. (3Marks) Calculate the amount payable, if the Ghanaian dealer has chosen to pay the supplier on March 1" 2017. (4Marks) Question3. (a) In foreign currency trading, you are given the following information about currency rates for the pound sterling for spot and forward contracts. Currency Spot rate I Month Forward rate 3 Month Forward Rate US Dollar $1.520 - 1.00 $1.510 - 21.00 $1.510 - 21.00 Canadian Dollar CAD$ 1.850 CAD$ 1.860 CAD$ 1.855 Require: (i). Calculate the cost or value in pounds to a US customer who has $50.000 and wishes to BUY . at one month forward rate from his bankers. (3.5Marks) (b). An American investors have identified two projects for investment in the Coffee industry of Ghana, project A and B. Each of the projects will require start-up capital of $50.000.00 respectively. The project will use machine apparatus and conveyance trucks at a cost of $20.000 in the production and distribution of the Coffee products. The remainder will be used as working capital. The projects are expected to have FIVE years life-span, after the company will be sold at the Ghana Stock Exchange Market The project will start from May 2017. All estimated cash-flow are to be repatriated to America at a hedged exchange rate of GHc4.00 are to $1.00 at end of each year. Project A B Initial Capital (550.000.00) ($50,000.00) Cash-flow Cash-flow GHe GHc Year 1 100,000 150.000 Year 2 150,000 90.000 Year3 50.000 80.000 Year 4 22.000 30.000 Year 5 20.000 30.000 Required: i. Calculate the pay-back -period for each of the project for the investor (8Marks) ii. Calculate the amount in cedi flown into Ghana as the initial capital for the investment using the hedged rate. (5Marks)