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(a) 4 x 6

> 7x + 3

2 x 3 5x + 4 6 2 2 22 (b) x 1 (c) x 13 5

(b)

(c) 5 x + 2 10 x 20

2. Multiply out the brackets: (a) 7(x + 2y) 2(3y 5x) (b) 2x2 + y z2 2(3x2 + 2y z) 2x) Answer: (a) 17x + 8y (b) -4x2 3y z2 + 2z (c) 4x2 25

3.

It is estimated that the annual cost of driving a new Destini is given by the formula TC=0.45n+1800, where n represents the number of miles driven per year and TC is the cost in dollars. Jane has purchased a Destini and decides to budget between $6000 and $7200 for next years driving costs. What is the corresponding range of miles that she can drive her new Destini? (Answer: 9,333.33 miles < n < 12,000 miles)

4. Factorize the following expressions. (a) 4x2 16z2 (b) p2q2 225 Answer: (a) (2x 4z)(2x + 4z) (b) (pq 15)(pq + 15) 5. Evaluate the following without using a calculator. (a)

4 30 x 5 38

(b)

3 1 80 x 5 24 100

3 5

(c) 8 (e) 4

9 1 3 2 +2 10 2 5 29 (d) 2 (e) 5 30

8 7

5 2 +1 6 15 1 2 Answer: (a) 1 9

(d) 1

(b)

1 32

(c) 9

26 35

6. Find expressions for the following algebraic functions, simplify the answers as far as possible. 2 x 3 + 6 x 2 2( x 2) 2 1 x2 + 2 (a) (b) x x x2 x2 (c) 2( x +1)

x2 4 2x 2 x 6

2 x +1

(d)

(b)

1 x +2

2

(c)

2 x ( x + 2) x +1

(d)

x +2 2x +3

7. Without using your calculator evaluate: (a) 256 2 Answer: (a) 16 8. Simplify (a) x x

2 3

2

x3 y3 (b) xy 1

3 (e) ( +5) 0

(c) ( x 2 y 2 ) 2

Answer: (a) x 2 3

(b) (xy2)2

(c) x4y

9. Use the rules of logs to simplify (a) log a ( xy ) log a 3 x + 2 log a x Answer: (a) log a ( x 8 / 3 y ) (b) log b (

x9 ) y4

(c) A x A2 x = A

(c) x = 1/3

10. Solve the following equations: (a) 5 x = 125 (b) 5 2 x 6 x = 811 (c) 5 x 2 = 25 Answer: (a) x = 3 (b) x = 1.34 (c) x = 4 (d) x = 2.42 11. Express the following exponential functions as logs: (a) y = e t 4 (b) y = e 3 t

1 3

1

(d) 5 3 = 1010

x

ce 2

(b) ln (ce 2t )

(c) ln

a e4

(d) ln

e3 e6

(b) ln c + 2t

(c) ln a 4

(d) 3

(e)

1. The number of items, N, produced each day by an assembly line worker, t days after an initial training period, is modeled by N = 100 100 e 0.4 t (a) Calculate the number of items produced daily (i) 1 day after the training period (Answer: 33) (ii) 2 days after the training period (Answer: 55) (iii) 10 days after the training period (Answer: 98) (b) What is the workers daily production in the long run? (Answer: N = 100) (c) Sketch a graph of N against t and explain why the general shape might have been expected. 2. A team of financial advisers guiding the launch of a national newspaper has modeled the future circulation of the newspaper by the equation N = c(1 e-kt), where N is the daily

circulation after t days of publication, and c and k are positive constants. Transpose this formula to show that

t= 1 c In k c N

(a)

k =

1 In 2. 30

Calculate the daily circulation after 20 days of publication. (Answer: 222,023.69) (b) After how many days will the daily circulation first reach 525,000 ? (Answer: 90 days) (c) What advice can you give the newspaper proprietor if it is know that the paper will break even only if the daily circulation exceeds 650,000?. For selected years from 1960 to 2005, billions of dollars of total U.S. personal income I can be approximated by the formula below; I=456.1(1.074)t Where t is the number of years past 1960. (Source: U.S. Department of Commerce) (a) What t values correspond to the years 1970, 1990, and 2002? (b) The actual total personal incomes (in billions of dollars) for the years in part (a) were as follows. 1970 1990 2002 838.8 4878. 8881.9 6

3.

(c)

What does the formula predict for these years? What does the formula predict for the total personal income in 2012? (Answer: (a) 10, 30, 42; (b)$ 931.3, $3883.2, $9146.2 billion; (c) $18676 billion)

t

4.

0

minimum number of minutes required for the temperature of the liquid to drop below 50 0 C . Round up to the nearest whole number. (Answer: 5 minutes)

5.

The temperature of plastic in 0 C , t minutes later is given by 25 (1.6 ) t . Find the minimum number of minutes required for the temperature of the liquid to reach above 0 1800 0 C . Round up to the nearest whole number. (Answer: 1 minutes) Mr Richard invested RM10,000 in unit trust. The money invested will become n RM 10 ,000 (1.08 ) for a period of n years. Find the minimum number of years required for the amount of money invested to grow to RM50,000. Round up to the nearest whole number. (Answer: 21 years) Aladdin has RM20,000 to invest. He wants to invest in the same unit trust as Mr Richard (refer Q6). Based on the same formula, RM 20 ,000 (1.08 ) n for a period of n year, find the number of years required for the amount of money invested to double the initial amount invested. Round up to the nearest whole number. (Answer: 9 years)

6.

7.

UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF ACCOUNTANCY AND MANAGEMENT Self-Practice Questions 1. A firms annual sales fall from RM50,000 to RM45,000 from one year to the next. Express the fall as a percentage of the original. Answer: -10% 2. The government imposes a 5% service tax on the prices of goods. How much does the consumer pay for Nasi Lemak priced by a shop at RM5.50 ? Answer: RM5.78 3. The GDP of a country has increased by 6.2% in year 2003 with the value RM135 billion. What was the GDP for year 2002 ? Answer: RM127.12 billion 4. The price of a monitor is RM 297.50 after a 20% reduction is taken. What was the price of the monitor before the reduction? Answer: RM371.88 5. PB books shop sells books at 35% discount from the retail price. If it sells a book for RM19.50. Find (a) The retail price. (b) The customer only pays for RM15.00 for the second book. What was the further reduction in percentage? (c) The overall percentage discount obtained by buying the two books form the shop in the sale compared with the manufacturers retail price. Answer: (a) RM30.00 (b) 23.08% (c) 42.5% 6. Find the equilibrium price and quantity for the following markets: (a)

QS = 20 + 3P Q D = 220 5 P

(b)

Q S = 45 + 8 P Q D = 125 2 P

(c)

Q S + 32 7 P = 0 Q D 128 + 9 P = 0

(d)

13 P Q S = 27 Q D + 4 P 24 = 0

Answer: (a) P = 30, Q = 70 (b) P = 17, Q = 91 (c) P = 10, Q = 38 (d) P = 3, Q = 12 Supply and demand conditions can also be expressed in quadratic form. Find the equilibrium price and quantity, given the demand function P + Q 2 + 3Q 20 = 0 and the supply function P 3Q 2 +10 Q =5 . Answer: P = 2, Q = 3 Discussion Questions

7.

1. A quadratic function is given. (a) Sketch its graph. (b) Find its maximum or minimum value. (i) f ( x ) = x 2 + 2 x (ii) f ( x) = x 2 4 x + 3 (iii) f ( x ) = 2 8 x x 2

Answer: (i) minimum value (-1, -1) (iii) maximum value (-4, 18)

2.

Given the demand function Q =100 P and express total revenue (TR) as a function of Q and hence sketch a graph of TR against Q. What value of Q maximizes TR and what is the corresponding price? Answer: Q = 50, P = 50

3. Two machines, A and B, are being used to process certain items. The cost function for each machine is:

M achineA M achineB : y =15 + 3 x : y =18 x + x 2

where, y = cost of producing x items (RM) and x = number of items processed per hour (hundreds). If the maximum speed at which both machines can run is 400 item/hour: (a) Plot the graphs of the two cost functions on the same diagram. (b) Use the graphs to find the range of production for which each item is produced more cheaply using: (i) Machine A (ii) Machine B (c) Using the graphs to find the total cost during one hour: (i) of producing 150 items on machine A (ii) of producing 350 items on machine B 4. A manufacturer of tennis rackets finds that the total cost of manufacturing x rackets/day is given by 0.0001x2+4x+400 ringgit. Each racket can be sold at a price of p ringgit, where p = -0.0004x+10. Find an expression giving the daily profit for the manufacturer, assuming that all the rackets manufactured can be sold. Hint: the total revenue is given by the total number of rackets sold multiplied by the price of each racket. The profit is given by revenue minus cost.

4. Customer A has RM15, 000 to invest. If part is invested at 10% and the rest at 15%, how much should you advise Customer A to invest at each rate to yield 12% on the total amount? [Answer: RM9,000 at 10%; RM6,000 at 15%]

UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF ACCOUNTANCY AND MANAGEMENT ACADEMIC YEAR 2011/2012 TUTORIAL 4 (Questions)

Self-Practice Questions 1. Find the slope of the straight line passing through (a) (2,6) and (3,9) (b) (2,-1) and (6,-5) Answer: (a) 3 2. Differentiate:

3 2 (a) y = 4 x 12 x + 3 x +12

(b) -1

2 7 + 3 2 x x

(b) y = ( x 4 + 3x 2 5) 3 (e) y = x 3 ( x 2 + 5) 3

(c) y = 4 x 3 (f) y =

2x 2 x 1

1

(d) y =

x2 x2 +1

Answer: (a) 12 x 2 24 x + 3

2x (d) 2 ( x +1) 2

3.

2 2 2 2

(c) 6 x 2 + (f)

x (3 x 4) ( x 1)

3 2

4 21 x3 x 4

Evaluate f (x) for each of the following functions at the given point. 2 2 (a) f ( x) = 8 x 4 + at x = 1 (b) f ( x) = x 2 at x = 2 x x Answer: (a) 6

4.

(b) 0.8536

d2y in the case when dx 2 (a) y = 12 10 x + 6 x 2 2 x 3 (b) xy = 3 x 4 + 4 x 2 Answer: (a) 12 12x (b) 18x

dQ for the supply function, Q = P 3 + 2 P 2 + P +1 dP 30 d ( AC ) (b) for the average cost function, AC = 2 + 10 Q dQ dQ (c) for the production function Q =10 L3 dL

(a) (d)

Marginal revenue in the case when the demand equation is given by Q = (b)

60 Q3

5 4 x +C 4

(c) 15 L

(d)

100 3Q 100 2Q

100 P 2 2

4 3 x 3x 2 + 5 x + C 3

(c) f (x) =

3 +C x

(d) f (x) = 12x2 + 5, when x = 1 and f (x) = 10. Answer: (a) (b) (c)

3 x2

(d) 4 x 3 + 5 x + 1

7.

Demand function is Q =

100 P 20

Q per unit 50

Find expressions for (i) TR and MR in terms of Q Answer: (i) TR = 100Q 20Q2 (ii) TC = 150 + 4Q +

8.

2

Q 50

MC = 4 +

1 Q 25

A manufacturer knows that if x (hundred) products are demanded in a particular week: (i) the total cost (TC) function (RM000) is 14 + 3 x (ii) the total revenue (TR) function (RM000) is 19 x 2 x 2 Find: (a) Derive the (total) profit function. (b) The profit break-even points (BEP). (c) Calculate the level of demand that maximizes profit, (the maximum profit point) and the amount of profit obtained. Answer: (a) 16x 2x2 14

9.

(b) x = 1 or 7

40 P (hundreds). The fixed costs 8

(RM) of production are 12, and the variable costs (RM) are (9 Q) per units.

(i) (ii)

(iii)

Write down the expressions for total revenue (TR) and total costs (TC). Hence obtain the expression for the profit function, . Find the price and quantity at which is maximum. Find the price and quantity when the product is break even.

Answer: (i)TR = 40Q 8Q2 TC = 12 + 9Q Q2 (ii) P = 22.29, Q = 31/14 (iii) P = RM8 or RM 36.57, Q = 4 or 3/7 10. If the demand equation of a goods is Q =

= -7Q2 + 31Q 12

d x

b) e)

1 5

d x

c) f)

4 x (2 x

d x 3 x 4 )dx

xd x

dx

4

(5 x

+ 2 x 2 + 3 x dx

5 (b) x 5 + c 4

(c) x + c

4

2 (d) x 2 + c 3

5 4 2 3 3 2 x + x + x +c] 4 3 2

(f)

2 7 3 5 x x +c 7 5

(g)

12.

2 2 x + 6x 2 3

3 1

1 1 y = x 2 +3 x 2

x d

Answer: y =

13.

3

1 y = 2 x 5 3 x 4

x d

1 Answer: y = x 6 4 x 4 + 6 3

Discussion Questions 1. If fixed costs are 15 and the variable costs are 2Q per unit, write down expressions for total cost (TC), average cost (AC) and marginal cost (MC). Find the value of Q which minimizes AC and verify that AC = MC at this point. (Answer: Q = 7.5 ) 2. A firms short-run production function is given by Q =10 L2 0.8 L3 . Find the value of P L, which maximizes A L (Average Production) and verify that MP L = APL at this point. Answer: L = 6.25 3. A computer firm launches a new monitor on 1st June 2002. During the following period a rough estimate of the number of orders, N received t days after the launch is given by N = 2t 2 0.03t 3 . What is the maximum number of orders received on any one day of the year? (Answer: Max. number of orders = 1,316.8 received after 44 days)

4. The supply and demand equations of a pair of safety shoes are given by QS = P 8 &

QD = 80 P 3

demanded respectively. (i) Find the equilibrium price and quantity. (Answer: P = 26, Q = 18) (ii) If the government imposes a fixed tax of RM36.00 on each pair of shoes, find the equilibrium price and quantity. (Answer: P = 53, Q = 9) 5. Given that the total fixed costs are RM 4.50, variable costs are RM 2.00 per unit and the demand function is Q = (i) Write down the expressions for total revenue (TR), total cost (TC) and profit ( ) functions in terms of quantity (Q). (ii) Sketch a graph of against Q. (iii) Find the price and quantity when at which is maximum. Answer: (iii)P = 6.5, Q = 6 6. A business analyst from Factory A which is located at Bayan Lepas, Penang, estimated that the demand function facing the factory for Optical Transceivers is

QD = 620 P . 12

3(11 P) . 2

He further reported that if Q Optical Transceivers are demanded in a particular day, the total fixed cost is RM200 while the variable cost is RM ( 200 + 2Q ) per unit. (a) Find the expressions for total revenue and total cost. (b) Find the expression for profit function. (c) Calculate and verify the profit maximizing level of output. What is the maximum profit for producing this level of output? (d) Determine the break-even output levels. (e) Using the answer obtained from (c) and (d), sketch the curve for profit function. Clearly show the profit maximizing level of output and corresponding profit level. Answer: (c) Q = 15, = RM2,950 7.(a) (d) Q = 0.484 or 29.516

For a limited edition of a branded watch, the supply and demand equations are given by : QS = P 380 and QD =

supplied and quantity demanded respectively. Find the equilibrium price and quantity. (b) If the total cost function for producing brand WCE is given by TC = Q2 + 2Q + 8, and the demand function is Q = (i) (ii)

34 P . 4

Find the total revenue function (TR) in terms of Q. Find the profit function () in terms of Q. (iii) Find the Q values at break even level. (iv) Find the Q value that maximizes profit, and the amount of profit generated. Sketch a graph of against Q. Answer: (a) P = 737 Q = 357

(b)

dTC = 25 + 30 Q 9Q 2 . Fixed cost is 55. Find: dQ Answer: TC = 25 Q +15 Q 2 3Q 3 + 55 55 2 Answer: AC = 25 +15 Q 3Q + Q Answer: VC = 25 Q +15 Q 2 3Q 3

8. Marginal cost is given by MC = (a) total cost function (b) average cost function (c) variable cost function

dTC = 32 +18 Q 12 Q 2 , FC = 43 , find: dQ (a) total cost function Answer: TC = 32 Q + 9Q 2 4Q 3 + 43 43 2 (b) average cost function Answer: AC = 32 + 9Q 4Q + Q 2 3 (c) variable cost function Answer: VC = 32 Q + 9Q 4Q

9. Given MC =

1 3 1 3

UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF ACCOUNTANCY AND MANAGEMENT ACADEMIC YEAR 2011/2012 TUTORIAL 5 (Questions) Self-Practice Questions Find the 15th term and the sum of the first 15 terms of the progression: 4, 7, 10, 13, . (Answer: 46, 375)

1.

Find the 8th term and the sum of the first 8 terms of the progression: 1, 3, 5, 7, 9, 11, . (Answer: 15, 64)

2.

Find the 8th term and the sum of the first 8 terms of the geometric progression: 1, 1.05, (1.05)2, (1.05)3, .. (Answer: 1.4071, 9.5491)

3.

RM 1,250 is invested at 8 percent simple interest. How much will have accrued after 4 years? (Answer: RM 1,650)

4.

5. Find the amount of: (a) RM 500 compounded at 12 percent over 5 years. (Answer: RM 881.17) (b) RM 800 compounded at 9 percent over 6 years. (Answer: RM 1,341.68) A sum of RM 800 has been invested at an interest rate of 12 percent per annum for 5 years. What is the value of this investment, if the interest rate is paid as simple interest and compounded each year? (Answer: RM 1,280.00 and RM 1,409.87)

6.

7. Find the effective interest rate corresponding to the given nominal rate. (a) 20 percent compounded semiannually (Answer: 21%) (b) 20 percent compounded quarterly (Answer: 21.55%) (c) 20 percent compounded monthly (Answer: 21.94%) (d) 20 percent compounded daily (Answer: 22.13%) 8. Find the accumulated amount after 3 years if RM 2,500 is invested at 10 percent per year compounded. (a) annually (b) semi-annually (c) quarterly (d) monthly (e) daily Answer: (a) RM3,327.50 (e) RM3,374.51 (b) RM3,350.24 (c) RM3,362.22 (d) RM3,370.45

9. Find the present value of: (a) RM 2,000 in 3 years at discount rate 5 percent. (b) RM 3,000 in 4 years at discount rate 10 percent. (c) RM 3,500 in 5 years at discount rate 15 percent.

10.

Find the present value of a debt of RM 2,500 taken out over 4 years (with no intermediate repayments) where the borrowing rate is 12 percent and the worth of money (discount rate) is 9.5 percent. (Answer: RM 2,736.25)

11. What is the present value of: (a) RM 200 p.a. received for 10 years at 10 percent? (Answer: RM 1,229.00) (b) RM 200 p.a. received for 10 years, commencing in 5 years time, at 10 percent? (Answer: RM 763.20) 12. Over a five-year period, an original principal of RM3,000 accumulated to RM3,572.83 in an account in which interest was compounded monthly. Determine the interest rate. (Answer: 3.5%) 13. You are offered RM1,000 today or RM25,000 in 25 years. Assuming that you can earn 11 percent on your money, which should you choose? (Answer: RM25,000) Discussion Questions 1. How long will it take for RM600 to amount to RM700 if invested at 8.5% compounded quarterly? (Answer: 2 years) 2. An investment of RM 10,000 has been made on your behalf for the next 5 years. How much will this investment be worth if: (a) The rate of interest is 10 percent per annum. (b) Interest is paid at 7 percent per annum for the first RM 1,000, 9 percent per annum for the next RM 5,000 and 12 percent per annum for the remainder. (c) The rate of interest is 9 percent per annum but paid on a 6 monthly basis? Answer: (a) RM 16,105.10 (b) RM 16,145.04 (c) RM 15,529.69 3. (a) How much would an investment of RM 1,500 accumulate to in three years if interest were paid at 6 percent per annum for the first year, 8 percent per annum for the second year and 10 percent per annum for the third year? (b) A bank offers a return of 7 percent interest compounded annually. Find the future value of a principle of 4,500 after six years. (c) A principal, RM 7,000 is invested at 9 percent annual interest rate for 8 years. Determine its future value if it is compounded semi-annually. (d) If the accumulated amount is RM 1,160 at the end of two years and the simple annual interest rate is 8 percent, what is the principal? Answer: (a) RM 1,888.92 (b) RM 6,753.29 (c) RM 14,156.59 (d) RM 1,000.00 4. Your parents are planning to retire in 20 years. They currently have RM 250,000 and they would like to have RM 1,200,000 when they retire. What annual rate of interest would they have to earn on their RM 250,000 in order to reach their goal. (Answer: 8.16%) You just started your first job and you want to buy a house within 3 years. You are currently saving for the down payment. You plan to save RM 5,000 the first year. You also anticipate that the amount you save each year will rise by 10 percent a year as your salary increases over time. Interest rates are assumed to be 5 percent and all savings occur at year end. Sketch the time line. How much money will you have for a down payment in 3 years? (Answer: RM 17,337.50)

5.

UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF ACCOUNTANCY AND MANAGEMENT ACADEMIC YEAR 2011/2012 TUTORIAL 6 (Questions) Self-Practice Questions A national lottery commission pays the winner of the Million Dollar lottery 20 installments of RM 50,000 per year. The commission makes the first payment of RM 50,000 immediately and the other n = 19 payments at the end of each of the next 19 year. Determine how much money the commission should have in the bank initially to guarantee the payments, assuming that the balance on deposit with the bank earns interest at the rate of 8 percent per year compounded yearly. (Answer: RM 530,179.96)

1.

2. From age 30 to age 45, Cik. Siti deposited RM 350 at the end of each month into a retirement account. She made no withdrawals or further contributions until age 55. En. Ali made deposits of RM 500 into his retirement account from age 45 to age 60. If both account earned interest at the rate of 4 percent per year compounded monthly, who ends up with a bigger nest egg upon reaching the age of 60. (Answer: RM 170,960.31 and RM 134,169.53) If a short-term loan of RM10,000 is to be amortized through equal payments at the end of each quarter for three years, and the interest rate is 8% compounded quarterly, how much is each payment? (Answer: RM945.60)

3.

A sum of RM 5,000 was invested 5 years ago. At the end of each year a further RM 1,000 was added. If the rate of interest paid was 12 percent per annum, how much is the investment worth now? (Answer: RM 15,164.56)

4.

You require RM 4,000 in 5 years time. How much will you have to invest at the end of each year if the interest charged is 15 percent per annum? (Answer: RM 593.26)

5.

6. A sum of RM 99,000 is to be repaid over a 25-year period through equal installments made at the end of each year. If an interest rate of 6 percent per year is charged on the unpaid balance and interest calculations are made at the end of each year, determine the size of each installment so the loan is amortized at the end of 25-year. (Answer: RM 7,744.45) What monthly payment is required to amortize a loan of RM 20,000 over 5 year if interest at the rate of 12 percent per year is charged on the unpaid balance and interest calculations are made at the end of each month? (Answer: RM 444.89)

7.

8. The proprietor of XYZ Sdn Bhd has decided to set up a sinking fund for the purpose of purchasing a truck in 3 years time. It is expected that the truck will cost RM 80,000. If the fund earns 12 percent interest per year compounded quarterly, determine the size of each (equal) quarterly installment the proprietor should pay into the fund. (Answer: RM 5,636.97)

Your uncles newborn baby receives a RM5,000 gift toward a college education from your grandparents. How much will the RM5,000 be worth in 17 years if it is invested at 7% compounded quarterly? (Answer: RM16,267.11)

9.

An EPF account has RM20, 000 in it and the owner decides not to add any more money to the account other that interest earned at 6% compounded daily. How much will be in the account 35 years from now when the owner reaches retirement age? (Answer: RM163,295.21)

10.

11. It is estimated that an investment in a new process will cause the following cash flow: End year 0 1 2 3 4 5 6 Cash Inflow (RM) 10,000 10,000 15,000 20,000 10,000 Cash Outflow (RM) 40,000 8,000 The firm wishes to earn at least 5% per annum on project of this type. In addition, the investment have to undergo a regular expenses every three years time, with the cost RM3,000. Calculate the Net Present Value (NPV) of the project and comment on the course of action to be taken. (Answer: +RM 732.68) Discussion Questions

1.

SCC Corporation wishes to establish a sinking fund to retire a RM 100,000 debt that is due in 10 years. If the investment will earn interest at the rate of 12 percent year compounded quarterly, find the amount of the quarterly deposit that must be made in order to accumulate the required sum. (Answer: RM 1,326.24) David deposits RM 1,000 at the end of each year for 10 years into an account he believes will yield 6 percent compounded annually. (a) Find the future value of this annuity. (b) Find the lump sum that must be deposited today at 8 percent compounded annually to generate the same future value in 10 years. This lump sum is the present value of the annuity. (Answer: RM 13,180.79 and RM 6,105.26) Ahmad secured a bank loan of RM 180,000 to help the purchase of a house. The mortgage is to be amortized through monthly payments for a term of 25 years, with an interest rate of 6.8 per year compounded monthly on the unpaid balance. He plans to sell his house in 10 years. How much will Ahmad still owe on his house? (Answer: RM 140,740.35) It is estimated that an investment in a new process will cause the following cash flow : End year 0 1 2 3 4 5 6 Cash Inflow (RM) 15,000 15,00 20,00 20,00 10,000 0 0 0 Cash Outflow (RM) 50,000 10,00 0 The firm wishes to earn at least 5 percent per annum on project of this type. a) Calculate the Net Present Value (NPV) of the project and comment on the course of action to be taken. (Answer: NPV = 6,625.92) b) Estimate the Internal Rate of Return (IRR) for the project and interpret the result. (Answer: 8.21%)

2.

3.

4.

5.

In 10 years, a RM50,000 machine will have a salvage value of RM5,000. A new machine at that time is expected to sell for RM58,000. In order to provide funds for the difference between the replacement cost and the salvage value, a sinking fund is set up into which equal payments are placed at the end of each quarter. If the fund earns 8% compounded quarterly, how much should each payment be? (Answer: RM 877.45)

6. (a) Calculate the future sum of RM5,000, given that it will be held in the bank for 5 years at an annual interest rate of 6% compounded quarterly. (b) Siti wished to have RM50,000 in the future date. She makes a deposit of RM2,897.23 at the end of every quarter into her savings account that pay and interest of 4% compounded quarterly in order to accumulate the RM50,000. How many years will it takes for Siti to accumulate the RM50,000? (c) The management is considering a project of buying a new machine in a new production line, which will cause the following cash flow: End year 0 1 2 3 4 5 6 7 Cash Inflow (RM) 1,000 2,000 2,500 3,000 3,500 4,000 4,000 Cash Outflow (RM) 15,000 If the management wishes to earn at least 5 percent per annum on project of this type, calculate the Net Present Value (NPV) of the project and comment on the course of action to be taken. Answer: (a) S = RM6,734.28 (b) t = 4 (c) NPV =963.73 7. A debt of RM5,000 with interest at 5% compounded 6 monthly is amortized by equal semi-annual payments over the next 3 years. (a) Find the value of each payment (Answer: 907.75) (b) Construct an amortization schedule Utarict estimates that it will need RM100, 000 in 8 years to replace some computers in the computer lab. If it establishes a sinking fund by making fixed monthly contributions into an account paying 7.5% compounded monthly, how much should each payment be? (Answer:RM763.39)

8.

9. Hari-hari Loan, an online lending service offered a new auto loans package of 36month at 7.56% compounded monthly to applicants with good credit ratings. (a) If Ahmad have a good credit rating and can afford to pay monthly payments of RM350, how much can he borrow from Hari-hari Loan? (Answer:RM11,241.81) (b) What is the total interest he will pay for this loan? (Answer: RM1,358.19) 10. A low cost apartment costs RM35,000. You pay 20% down payment and amortize the rest with equal monthly payments over a 12-year period. (a) If you must pay 8.75% compounded monthly, what is your monthly payment? (Answer: RM314.72) (b) How much interest will you be paying? (RM17 ,319.68)

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