The Business Case Suppose you are providing expert advise to a company that likes to maximize the financial benefits of all their financial assets they have like cash in hand, term deposits in the bank, outstanding dues to be received, as well as other assets such as buildings and some machines that are being rented currently for a stream of monthly revenue All values are as of today, i e October 1 st , 2021 Cash in hand $ 10, 500 Money in the checking account of a bank without any interest $ 3, 500 Fixed Term Deposit, now at end of 3 rd year of a 5 year term deposit at j 12 0 06 $ 29,917 Buildings with a monthly net rental revenue increasing with general inflation rate of 2 per yr $ 15,000 Machines with a monthly net rental revenue increasing with general inflation rate of 2 per yr $ 26,000 A promissory note issued on October 1 st , 2021 with face value of $8000 and maturity date after 6 months with promised simple interest rate of 5 (grace period of 3 days can be considered) $20,000 Outstanding payments to be received from customers at end of 2 months from today $5000 First Project Report due on October 29 th 2021 (40 marks) For this report, all financial decisions are to be made as on end of October 31 st 2021, i e all present value calculations are to be made as of end of October 31 st , 2021, These are some basic assumptions There are no bank charges for the amount in the bank deposits The term deposit can only be cashed on completion of its term The buildings and machines are leased from another firm and currently being rented by the company to third parties Thus, their depreciation cost and salvage values are not considered here The rental revenue is net of all running and maintenance costs of the buildings and machines The lease expires in two years from now thus there wont be any revenue thereafter Outstanding payments do not attract any interest or penalty The company can earn a simple interest of 4 per year from all money not utilized anywhere, on month by month basis, i e on monthly terms The nominal interest rate used by the company for discounting is known only to you which should be between j 2 5 to j 12 9 That is you decide this interest rate and the value for m What the Company likes to know The value of all financial assets (including the flow of rental values) the company has as at the end of October 31 st , 2021 (Please use the discount rate you choose as per item 6 of assumptions) The company is deciding on whether to engage a contractor to operate their assets with a commission of 5 That is, they like to receive an annuity of the value of all assets they have as on October 31 st , 2021, to be paid by the contractor monthly to the company over a period of five years by managing the assets The company will pay 5 of the annuity to the contractor as commission The monthly payments will start from the end of November 2021 i e , after one month How much will be the value of the annuity and how much the company will receive after paying 5 to the contractor For annuity calculation, the company likes to use the nominal interest rate they use for discounting future values that you know as per assumption 6 above If the decision is made after one year, i e as of October 31 st 2022 , will the amount of monthly payments after commission differ How much will be the new annuity that the company will receive starting end of November 2022 after paying 5 to the contractor

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The Business Case: Suppose you are providing expert advise to a company that likes to maximize the financial benefits of all their financial assets they

The Business Case: Suppose you are providing expert advise to a company that likes to maximize the financial benefits of all their financial assets they have like cash in hand, term deposits in the bank, outstanding dues to be received, as well as other assets such as buildings and some machines that are being rented currently for a stream of monthly revenue. All values are as of today, i.e. October 1^st, 2021:

Cash in hand	$ 10, 500
Money in the checking account of a bank without any interest	$ 3, 500
Fixed Term Deposit, now at end of 3^rd year of a 5-year term deposit at j₁₂=0.06	$ 29,917
Buildings with a monthly net rental revenue increasing with general inflation rate of 2% per yr.	$ 15,000
Machines with a monthly net rental revenue increasing with general inflation rate of 2% per yr.	$ 26,000
A promissory note issued on October 1^st, 2021 with face value of $8000 and maturity date after 6 months with promised simple interest rate of 5% (grace period of 3 days can be considered)	$20,000
Outstanding payments to be received from customers at end of 2 months from today	$5000

First Project Report due on October 29^th 2021: (40 marks)

For this report, all financial decisions are to be made as on end of October 31^st. 2021, i.e. all present value calculations are to be made as of end of October 31^st, 2021, These are some basic assumptions:

There are no bank charges for the amount in the bank deposits.
The term deposit can only be cashed on completion of its term
The buildings and machines are leased from another firm and currently being rented by the company to third parties. Thus, their depreciation cost and salvage values are not considered here. The rental revenue is net of all running and maintenance costs of the buildings and machines. The lease expires in two years from now thus there wont be any revenue thereafter.
Outstanding payments do not attract any interest or penalty.
The company can earn a simple interest of 4% per year from all money not utilized anywhere, on month-by-month basis, i.e. on monthly terms.
The nominal interest rate used by the company for discounting is known only to you which should be between j₂= 5% to j₁₂ = 9%. That is you decide this interest rate and the value for m.

What the Company likes to know:

The value of all financial assets (including the flow of rental values) the company has as at the end of October 31^st, 2021. (Please use the discount rate you choose as per item 6 of assumptions)
The company is deciding on whether to engage a contractor to operate their assets with a commission of 5%. That is, they like to receive an annuity of the value of all assets they have as on October 31^st, 2021, to be paid by the contractor monthly to the company over a period of five years by managing the assets. The company will pay 5% of the annuity to the contractor as commission. The monthly payments will start from the end of November 2021 i.e., after one month.
1. How much will be the value of the annuity and how much the company will receive after paying 5% to the contractor? For annuity calculation, the company likes to use the nominal interest rate they use for discounting future values that you know as per assumption 6 above.
2. If the decision is made after one year, i.e. as of October 31^st 2022., will the amount of monthly payments after commission differ? How much will be the new annuity that the company will receive starting end of November 2022 after paying 5% to the contractor?