BB Quiz

Tulay,Joseph Andrei Patrick I.. April 04, 2020

2016141644
Solve the following:
1. I loan an amount of 180,000 php on MITCC (Mapua Institute of Technology
Credit Cooperative.) payable in four years semi-monthly salary deduction @
12 % interest. What is my deduction every payday?

r ( 1+r )n
Formula = A−P n
( 1+r ) −1
P = 200,000 php
n = (24)(4) = 96
0.12
r= = 0.005
24

0.005 ( 1+0.005 )96

formula = A−200,000 96 = 2,628.29 php
( 1+0.005 ) −1

2. The company is evaluating two specific proposals to market a new proposal.

The current interest rate is 10 %.
Proposal A calls for setting up an in-house manufacturing shop to make the
product, requiring an investment of 300,000 dollars. The expected profits for
the first to fifth years are 50,000; 150,000; 200,000; 300,000 and 200,000
dollars respectively.
Proposal B suggest that the manufacturing operation be outsourced by
contracting an outside shop, requiring a front-end payment of 500,000 dollars.
The expected profits for the first to fifth years are 150,000; 200,000; 250,000;
150,000 and 100,000 dollars respectively. The expected profits would be
lower in earlier years due to third-party markup.
Which proposal should the company accept? Prove your answer.

N
n
(1+ R)
N= Cashflow
R= Interest
N=year
YEAR CASHFLOW DISCOUNT DISCOUNTED
FACTOR CASHFLOW
 0 -300,000 1 -300,000
1 50,000 0.9091 136,363.6
2 150,000 0.8264 165,289.3
3 200,000 0.7513 187,828.7

PROPOSAL A = NPV 348.772.70

YEAR CASHFLOW DISCOUNT DISCOUNTED

FACTOR CASHFLOW

0 -500,000 1 -300,000
1 150,000 0.9091 45,454.55
2 200,000 0.8264 123,966.9
3 250,000 0.7513 150,263
4 150,000 0.6830 204,904
5 100,000 0.6209 124,184.3

PROPOSAL B = NPV 154,025.70

Proposal A should be accepted because it has higher NPV which is 348,773

than Proposal B with a NPV of 154,026.