KINGDOM OF SAUDI ARABIA Academic year:1441-1442H

MINISTRY OF HIGHER EDUCATION Level : four

Al- Imam Muhammad Ibn Saud Islamic Course:Principlesof finance
University College of Economics and and investment -FIN102
Administrative Sciences Department of finance
and investment

2 ‫الواجب الثاني عدد‬

‫االسم‬ ‫الرقم الجامعي‬ ‫الشعبة‬

440015117
I0= your ID without first two digits, i.e if your ID is 440015117 then X will be 0015117

X = 0015117 = 15117 SAR

4 3 9 0 1 2 9 7 6
x x 9 0 1 2 9 7 6

All results must be numericand rounded to the nearest hundredth

Question 1:
Vendor 1 offers a discount of 2% if payment is made within 10 days. If the discount is not taken, full
payment is due in 30 days. The Monthly purchases amounted from this supplier (0015117) riyals. What is the
annual cost of not accepting the 2% discount? (APR1 = ?)
Soulation 1:

If the company decided to take advantage of the cash discount,

you must pay the value of purchases minus discount on the tenth
day following the date of purchase, or the amount of 14814
riyals:APR1 = 15117 × (1 - 2%) = 14814
This is the amount of funding from the supplier at no cost for 10
days.

Question 2:
A company needs to increase its working capital to 15117 riyals, the Chief Financial Officer (CFO) decide
to issue a commercial paper at a discount interest rate of 6 %. Note that the sale of this papers costing the
company SR 2,000 / 6 months.

1
1- Find the Face Value of Commercial Papers to collect 15117 riyals. FV1 =?
2- Find the effective interest rate of this type of financing.EIR1=?
Soulation 2:

1- Face Value of Commercial Papers = 15117 + (2000 × 2) FV1 = 20337

(1 - 0.6)
2- effective interest rate = 6%
100% - 6%
Soulation 2:

Question3:
A company needs to increase its working capital to 15117 riyals, the Chief Financial Officer (CFO) decide
to Get a 1-year short termloan from the bank
ataninterestrateof8%,notethatisrequiredtokeep20%asacompensating balance.
1- Find the Face Value of Commercial Papers to collect X riyals. FV2 =?
2- Find the effective interest rate of this type of financing. EIR2 =?

2
Question 4:
A company has borrowed an intermediate-term loan for X riyals at an interest rate of 8% annually for 3 years,
and provides for the loan agreement to be repaid in 3 equal installments, including interest and premium
repayment of the loan amount, paid at the end of each year starting from the first year.

1- Determine the value of the annual payment. R =?

2- Find the loan repaymentschedule.

year Annuity Interest Principal paiment Remaining balance of

loan
0
1 I1= P1= RM1 =
2 I2= P2= RM2 =
3 I3= P3= RM3 =

Question 5:
A company has borrowed an intermediate-term loan for X Riyals at an interest rate of 10% annually for 5 years,
andprovidesfortheloanagreementtoberepaidinfiveunequalperiodicinstallments(Annualprincipalpayments
+ interest on the remaining balance) paid at the end of each year starting from the first year.

1- Determine the annual value of the principal payment: PMT= ?

2- Find the loan repayment schedule.

year Annuity Interest Principal paiment Remaining balance of

loan
0
1 A1= In1= RMb1 =
2 A2= In2= RMb2 =
3 A3= In3= RMb3 =
4 A4= In4= RMb4 =
5 A5= In5= RMb5 =
Question 6:
Thecompany“ArabEquipmentleasing”wanttobuyequipmentforXriyals,andthentoleasetoothercompanies. The
estimated economic life of the equipment is 7 years, and can to be sold at the end of the period for X/1000
riyals(salvageValue).Thecompanyfollowsthepolicyofstraight-linedepreciationexpenseandrequirea return on
investment after tax of 25%. The company pays income tax at a rate of 15%. The company is committed to
providing maintenance services for all equipment leased. Maintenance cost is estimated 1500 SAR peryear.

1- Find the Rate of Return R = ?

2- Find the tax rate τ = ? 1
3- Find the sum of the discount factors 𝑆=∑7
𝑡=1 (1+𝑅)𝑡

4- Find the salvage value SV =?

5- Find the cost of investment CI =?
6- Find the depreciation D=?
7- Find the discounted salvage value DSV=?
8- Find the maintenance cost M = ?
9- Calculate the lease payment from the viewpoint of the Lessor. L =?

L CI M 1S DS DSV

1S1R
Question7:All results must be numericand rounded to the nearest hundredth

1- When you round off to the hundredth digit, you look at only the thousandth digit i.e. you focus onlyon
the nextdigit.
Say z = 4678.4546 When you round it to the nearest hundredth digit, you get z = 4678.45

2- When you have a percent transform it into decimal number. Say T = 35% you get T =0.35