Section Question One This question be attempted Chris Henry's local car dealership is offering a 5 year lease package which requires a first payment of 400 growing at 0.5% a month thereafter. What is the present value of the lease if the quod rate on the lease package is 6.0%, compounded monthly is marks) (b) Cian Healy is looking to double his money. How long will it take him to do so if the quoted interest rate is 40 Compounded monthly (c) Peter O'Mahony is waving in an account with a quoted interest rate of 5.0%, compounded quarterly Calculate the Annual Equivalent Rate (AER), (5 marks) Paul O'Connell's daughter is 9 years old today. He would like her to study sports science at UCC on her Ith birthday He is planning to make a deposits, beginning today and finishing on her 17h birthday, into an account to find her college fees and board. He estimates he will need 30,000 to fund her four year degree and will withdraw all of the money from the account on her 18th birthday to fund same. What is the size of each annual depositif quoted interest rate on the account is 8.0%? (5 marks) (Total: 20 Marks) Question Two This question was be attempted Compare and contrast the not present Value (NPV) and the international rate of return (IRR) decision rules incorporate Finance (Total: 20 Marks) Page 2 of 9 Section AnswerTWO Questions from this section Our Three Answer all parts Show all your workings Africa Lid is trying to decide betwem w m aily exclusive projects. Angel and Botswana, with the following attendant yearly net cash flow in thousands of euros ne (V Angola Botswana -25,000 16,000 6,0007 ,000 0 2,000 100001030530547054 3.054 Each project can only be undertaken once 0) Calculate the internal rates of return (IRR) for both projects (10 marks) (ii) Calculate the crossover point the point where Africa would be indifferent between the two projects) (10 marks) Based on your answers to parts) and ( hove, draw the net present value (NPV) profiles of both projects on the same graph and explain when Africa will choose Angola over Botswana, and vice versa. (10 marks) Total: 30 Marks) Page of Question Pour Show all your working Bar-B- Lid is planning a pilot project to test if there is sufficient demand in England to open up a chain of restaurants nationwide. In order to do so, Bar-B-O is planning to test the market in Newcastle Bar-B-0 estimates that start-up equipment costs for the Newcastle location will be 1,000,000. They believe that there is a 60% probability of the Newcastle location generating nel cash flows of 200.000 e uccess in the first year and 40% probability of generating net cash flows of 110.000 (ie, "aure"). Nel cash flows are expected to grow al 4.0% in each year thereafter Bar-B-Obelieves that if the Newcastle restaurant is a success in the test year then the concept will be successful in each of the 19 additional locations they have identified nationwide and expansion will commence at that stage. If the Newcastle restaurant is a failure" then Bar B. will not expand but, due to lease commitments, will be forced to continue to operate in Newcastle in perpetuity. The appropriate discount rate for this risky venture is 20.0% (20 marks) Calculate the value of the option to expand. (b) Suppose thm if the Newcastle restaurant is a failure" Bar-B-O will not be forced to operate the location in perpetuity but is instead able to break the lease, abandon the location and sell the equipment for 500,000 Calculate the value of the option to abandon. (10 marks) (Total: 0 Marks) Page 4 of 9