ASSIGNMENT ON BUSINESS FINANCE1. (FIN 310) FOR 300L (YR3) ACCOUNTING CLASS. Answer all question and show all working clearly (1.) Ben and co. Ltd owes #2.5million plus interest at 14% per year compounded quarterly which must be paid in 4yrs time by making payment into a sinking fund. Find the amount of semi-annual payment needed to pay the #2.5 million plus interest (the total periodic charge) if money in the fund earns 15% compounded semi annually. Prepare the sinking fund schedule to monitor how money grows in the fund. (2a.) Thomas, after reviewing his monthly budget, estimated that the amount he can afford to save monthly towards his proposed project is #6,000. He however discorver that he can borrow from his bank now at 15% per annum. Assuming he can repay at the end of 4yrs, how can he borrow given his budget in order to embark on the project? (b) Theodore a first year social science undergraduate has been given #180,000 by his uncle. Since he has no immediate need for this money, a friend advise him to invest it. After due consultation, he has decided to invest it for 5yrs in a bank account to enable him use the proceed for his masters program. However, he is faced with a dilema of whether to deposit it in a bank that offers 16% compounded quarterly or in another offering 18% interest compounded semi-annually. Advise him on which is more profitable. (3a) Mrs. Ayoola intends to establish an endowment for research in new state university by providing #850,000 annually. This amount is expected to grow at an average rate of 2 1/2% per annum in perpetuity. If the required rate of return on the universitys investment is 10%, how much would she need to invest, to establish this fund (to the nearest #000) (B) The proprietor of penguin dry cleaning dry cleaning services ltd struck a deal with his banker. Penguin ltd is to leave #5,500,000 at the bank for 41/2 yrs. The bank will then give penguin a cleaning equipment immediately. Penguin will still collect his #5.5million back at the end of 41/2 yrs. How much in effect is penguin paying for the equipment if interest rate is 13% per annum compounded semi-annually? (4a) The Adeyemo foundation plans to establish a fund that will pay a #450,000 prize to an outstanding chartered accountant. The first prize is to be awarded now and subsequent awards will be made available every two yrs thereafter forever. How much will the foundation need to establish the fund, if interest rate is 31/2% compounded annually? (B) Mr. Joseph Ezekwe, a DLI alumnus and chartered banker, intends instituting annual prizes forever to be awarded to be best first and final year students in DLI accounting and economics program. Amos can only afford #1.80million for this endowment. How much can be equally shared among the four (4) best students per annum (to the nearest #100) if interest rate is 4.5 percent compounded annually? (5) Consider cash floow of #450,000 at the end of year 1, #550,000 at the end of year 2 and #640,000 at the end of year 3. Assuming an interest rate of 2.5%, calculate the single amount that is equivalent in value: (a) if received in year 1 (b) if received in the end of year 2 (c) if received at the end of year 3. (6a) Mr. Abu borrowed #4million from his bank and agreed to amortise his debt, principal and interest at 13% by equal payment over the next 10yrs, the first due in a years time. What is the annual installmental payment? If mr. Abu is interested in knowing his outstanding principal amount of his #4million loan after the 7th payment, what is the amount to the nearest naira? (B) A small scale entertrenueur borrowed #10,000 from a friend and agreed to pay #17,620 in 5yrs time. What is the annual compounded rate of interest on this loan? (7a) Emeka is interested in knowing the present value of a #20,000 perpetuity, to be reeived annually from his investment company if it is discounted at 10.5% interest rate per annum, determine the value? (B) Three years from now, your cousin will proceed on his retirement on a pension of #36,000 monthly. The pension is expected to continue 10yrs. How much is this pension worth if he can earn 18% per annum Compounded monthly? (8a) James, a 200 level undergraduate aged 18yrs dreams of owning a #4.5million mercedes sedan car. If he invest part of the proceeds from his late fathers estate in a fund paying 12.5% annual rate of return and wants to buy the car 7yrs from now on the day he turns 25, how much of his inheritance must he invest today (to the nearest naira) so he can have the fund to buy the car? (B) How much should a rational investor pay for an 8yr state government bond if it has #1000 per value and pays #80 semi-annual coupon and is sold to yield (I) 17% (ii) 14% per annum compounded semi -annually? (9) Mr. Bernard is due to retire 8yrs from now, his employer will need put in place a pension plan by which he will be receiving #1.5million every year for 12years after retirement at 13.5% per annum. How much will need be paid every year into the fund for the pension plan for 8yrs, if interest rate for those 8-years period is 7.5 per annum. (B) How long will it take for an initial investment to graduate at 6% compounded annually? (10) Abel plc intends to lease an equipment for #3.5million, The lease contract is structured in the form of a 72-month annuity due at 18% per annum. What will the monthly lease payment be if the structure of the contract is in the fom of ordinary annuity? (B) what effective annual rate of interest correspond to 17.5%. Compounded (I) monthly (ii) continously? For more info contact... ADEKUNLE A ADEWUNMI. 08035194673-08053377438 BBM PIN: 2B4FDE83.
Posted on: Thu, 02 Oct 2014 05:38:26 +0000
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