TIME VALUE OF MONEY (Future Value) Exercise 1: You want to invest to a house and started to have savings today at $1,000 for 10 years . What will be the future value of money you will received in 10 years with the annual compound interest of 5%.

Exercise 2: Muthu planned to pay a house deposit in one year from now. The amount of deposit needed is RM10,000. The interest given by the bank is 10% per year. How much does Muthu need to save today?

Exercise 3: The Xavier Motor Company makes outdoor would like to consider tractor and snowblower as a demand for more powerful equipment in the company and due to some competitors are already moving in that direction. Management wants to make a decision based on only five years of projected cash flow because it feels the future beyond that is too vague to form a basis for current decisions. A financial analysis has put together a set of projected incremental cash flows for each project with a cost of capital 9% Net Present Value Year Tractor (cash flow) Snowblower (cash flow) Co (3000) (3,500) C1 (250) (700) C2 500 800 C3 1,000 1,200 C4 1,500 2,000 C5 1,500 2,000

Exercise 4: AG company would like to spend RM 700,000 on buying equipment. The cash inflows as in the Table. Calculate the payback period. Payback Period Year Cash Flow 1 150,000 2 150,000 3 200,000 4 600,000 5 900,000

Exercise 5: AJK company is considering two independent projects, L and M. Both projects require RM180,000 of initial outlay. The projected net cash flow for both projects as follows:

Year Project M Project L 1 80,000 40,000 2 70,000 50,000 3 60,000 60,000 4 50,000 70,000 5 40,000 80,000 Calculate the Payback period Which project promising a good payback period?

Exercise 6: Compute the Profitability Index (PI) for a project with the following cash flows if the cost of capital is 13%. Is the project acceptable on a stand alone basis? Period Cash Flow 0 (3,000,000) 1 100,000 2 500,000 3 1,000,000 4 1,500,000 5 200,000 6 500,000 7 1,000,000