UNIVERSITY OF GHANA (All rights reserved) END OF SEMESTER EXAMINATIONS: 2018/2019 UGBS 202: BUSINESS MATHEMATICS (3 credits) TIME ALLOWED: THREE HOURS INSTRUCTIONS: Answer ALL questions in both section A and section B. All questions must be answered on the question sheet. Carefully plan your answers to fit the spaces provided. No credit will be given for an answer with no work shown. section A (25 marks): this section contains 10 questions. Show your workings in the space provided and circle the correct answer. Each question carries 2.5 marks 1. An investor plans on putting his money in a business that doesnot cost much ofa fortune. He believes that the lifespan of the investment will not last for more than three years. Given this assertion, what is the best investment appraisal option for him to consider? ‘A. Net present value analysis B. Payback period C. Internal rate of return D. Annual worth analysis 4, The consumption function can be explained as a function of income x. Given that the consumption function of an organisation is given as C(x)=In(x? +3)’, what is the organisation’s marginal propensity to consume given that thei income level is 5? Correct your newer to the nearest whole number. (Hint: Apply the laws of log for his question) B, 10/6 CIs D.0 Page 1 of 14 Examiners: Dr. A. Afful-Dadzie, and Dr. A. Karimuteat Signature indes Number once to their income levels is y 3. The rate at which a family saves with reference 10 thi is gi S (x) =3x7 25-5, where x is piven as the income. Given that the family will no, fthe wwings for the family \ they do not earn an income, find an expression of the total saving: With respec, to their income —Sxte A. S(x)=6x-2 B.S (x)= c, 8(x) =3x? -2x-5x p, S(a)=3x -2x-S+e 4. In 2010, the simple weighted price index for a food basket containing 5 items, expressed asa percentage was 105%. Which of the following is true for the information given above? I. The base year for the index was the year 2000 UL. The price of the food items increased by 5% in 2010 relative to the base period Ill. The price of the food items increased by 5 percentage points in 2010 relative to the base period IV. Relatively, the price at the base period is less than the price in 2010. A. WandIV only B. and I only C. Mand IV only D. 1, 11, Il and IV only 5. The price indices for 3 items A, B, C in a food basket are 105, 99, and 102 respectively. A fourth commodity (item D) when added increased the mean price index by 4 percentage points Whaat is the price index of the food item D? ae B18 C1832 D, Cannot be determined Page 2 of 14 Examiners: Dr. A. Afful-Dadzie, and Dr. A. Karimaber A. 25 pieces B. 300 pieces C. 3600 pieces. 2700 pieces 7, Which ofthe following is true about mutually exclusive events? 1, Probability of intersection is zero I. Ona Venn diagram, mutually exclusive events are di I. The ptobability of either events occurring is the sum of their individual probabilities IV. They are also independent events A Land IT only B.1,landIV only C.landIVonly —_D. 1, Hand lll only $, The payment terms of a contract meant to be paid within a period of 20 years is such that after paying an amount of GH¢150000 at the end of the first year, subsequent payments reduce by GH#5000 each year for the remaining period. Find the present worth of the payments given that interest rate stands at 10% per annum, § GHy1,227,034.56 B, GH1,000,000.00 C. GHg1,554,069.12,__D.GH¢1,009,124.99 Afful-Dadzie, and Dr. A. Karimu h “eS of aaminers: Dr. ASyenature Index Number 9. Use the trapezium rule to evaluate the integral Ny turn } A. 0.784 B. 1.568 C. 7.84 D.O 10. How much interest will an investment of GH¢5000 yield after 5 years at a simple interest rate of 8.5% per annum? A. GH¢2125 B. GH¢7518.28 C. GH¢2518.28 D. GH¢7125, Page 4 of 14 Examiners: Dr. A, Afful-Dadzie, and Dr. A. Karimuyy bet Su! Sign we pisuer coal Hares questions in this seenion Bl ion setio" questi® J Kofi started a business of rehabilitating old homes, 3) Me converted itinto a three-family residence, Recently, anger WS not working properly. Since Mr. Kofi’s cash flow was not extensive, he was excited about purchasing a new refrigerator, He is considering two other options: purchase sed refrigerator or repair the current unit. He can pu | urchase a new one for $400, and it will spsily ust three years. If he repairs the current one, he estimates a repair cost of $150, but he also believes that there is only a 30% chance that it will last a full three years, and he will end ” purchasing @ new one anyway. If he buys a used refrigerator for $200, he estimates that there is 0.6 probability that it will last at least three years. [Fit breaks down, he will still have the option of repairing it for $150 or buying a new one. le recently purchased un old mansion one of his tenants complained that the Draw a decision tree for the problem above. (6 marks) ii, Determine Mr. Kofi’s optimal strategy (10 marks) Page Sof 4 Examiners: Dr. A. Afful-Dadzie, and Dr. A. KarimuIndex Number Signature b) Mr. Kwame is sponsoring a summer concert. He estimates that he will make GH¢300,000 i¢ it does not rain and make GH¢60,000 if it does rain. The weather bureau predicts the chance of rain is 0.34 for the day of the concert. An insurance company is willing to insure the concert against rain, which Mr. Kwame will pay GH¢30,000 to the insurance company irrespective of rain or no rain, and that he will receive GHe150,000 if it rains, but GHcO from the insurer if it does not rain? i, Ifhe buys this policy, what are his expected earnings from the concert? (4 marks) ii, What is the level of risk (i.e. standard deviation) associated with Mr. Kwame’s earnings? (4 marks) Page 6 Fs 1g 6 of 14 Examiners: Dr. A, Afful-Dadzie, and Dr. A. KarimuSignature Question 2 y) The marginal revenue for a company manufacturing x engines per week is given by Ax xed RO) where R(x) is the revenue in thousands of dollars. Find the equation for total revenue R(x) and evaluate it at x = 20 and a constant = 10. (5 marks) oducts, A, and B, The joint-cost function is c= 5qq+3qy + b) A monopolist produces two pr units of A and qp units of B. The demand 5000, where c is the total cost of producing q4 Functions for these products are given by P, = 205 2qq~ 4p and Pp = 153 ~~ da. where Py and Pp are the prices of A and B, respectively. Find the number of units of 4 and & that should be sold to maximize the monopolist's profit. (Hint: differentiate twice the profit fanction with respect to quantity A, and quantity B. (12 marks) Page 7 of 14 Examiners: Dr. A. Afful-Dadzie, and Dr. A. KarimuIndex Number : ©) People were given three choices of soft drinks and asked to choose one favorite. The following table shows the results, Diet cola [ Root beer | Lemon-drop | Under 18 years of age | 40 25 20 + [Between 18 and 40135 20 30 Over 40 years of age [20 30 35 i, Find the probability of a person over 40 years and who drinks root beer. (3 marks) Page 8 of 14 Examiners: Dr. A. Afful-Dadzie, and Dr. A. KarimuPee guile Sous 7 bility of .: probability of a person under 18 ye, rind the P ! 18 yeas who drinks Jet ev sid Lemondrop (3 marks) i jose consumers in Accra will demand 80 units of a product when the price is GH 12.20 0 ri and 35 units when the price is GH 25 each, , ; , Find the demand equation, assuming that itis linear. (4 marks) ji, Find the price per unit when 50 units are demanded. (3 marks Page9 of 14 Examiners: Dr. A. Alful-Dadzie, and Dr. A. KarimIndes Number Signature Question 3 a) A debt of GH¢2000 is to be repaid by 4 equal yearly payments with interest at the rate of 5% compounded annually. Complete the following amortization schedule for this debt. (6 marks) Period | Principal at beginning of period | Interest paid | Annual payment | Principal RepaidNuts mining company in Ghana is c ‘A mining company in Ghana is considering investing into two projects with b) information: ety ee aaa investment of GH3,000,000, an annual revenue of GHe100.000 Project Se tae by GH¢2,500 per year tll the end of the project i ject 2 fequires an investment of Gi4g2,500,000, an annul ev re of GHE70 starting in year 5 and increasing by 7% per y Seas eal ch Pati of GHe? 10,000 Calculate the NPV for both projects if the lifespan for both project is 12 years and the interest is 10% per year. (12 marks) eae a ‘Afful-Dadzie, and Dr. A. Karimurequire initial investment of GH¢620,000, and yield an annual net cash Now of GHe 130,000, Both machines will have no salvage value. Use a payback criterion to recommend which of the machines the com Pany shoulg purchase. Assume 360 days in a year and an interest rate of 6 %, (6 marks) ii. Which machine should be selected based on the Annual Worth method? (6 marks) Page 12 of 14 Examiners: Dr. A. Afful-Dadzie, and Dr. A. Karimuuml! Signatur Formuta sheet dy oy, Me chai rule: Ge de a? , wha - Price Index: Tha doPny, espe Pee Fhoeepa’ — Quanlty Index: Ly Index: P, = Sane, ; m paasche: Price Index: Fy mba, Quantity Index: Q, = eins : EP, singe value: F = pati” ni fae! ote peta o"~ iy Gatien part of an arithmetic gradient Kft mal a Geometric gradient to” fee), Pre tog |) Wheng #! n ra Alr Where; g = growth rate (rate of increase) interest rate wheng i Perpetuity/Capitalized cost 4 P i Nominal and effective nym igg=(145) -2 Payback period B treage mee miners: Dr. A. Aful-Dadzie, and Dr. A. Karima Page 13 of 14Index Number Net Present Value (NPV) Annual worth Pxix(ti® “O+DR=1 Expectation E(x) = DE Pax Var(x) = Vika PDL EGP s cov(x) = SH Signatureite UNIVERSITY OF GHANA (All rights reserved) | oF SEMESTER DISTANCE EDUCATION EXAMINATIONS: January 2017 ED UGBS 202: BUSINESS MATHEMATICS (3 credits) TWO AND HALF (22 HOURS) ICTIONS: Answer ALL questions from both section A and section B. All questions must pin zed on the question sheet. Carefully plan your answers to fit the spaces provided. woe ‘A (60 marks): This section contains 10 multiple choice questions. Show your workings ser ce provided and circle the correct answer. Each question carries 5 marks. Noeredit ee vn for an answer with no work shown, eee uch must you invest now at 15% per year interest to attain Ghe 2,000,000 in 30 years? sow ne 6666.67 b.Ghe 89540. Gho 30206.11 d.Ghe 1222006 e. Ghe 245789. Ge 66666. i % .d promise to repay the loan 48,000 now at an interest rate of 10% per year and pr ea et srGhe {6000 per year starting one year from now, the number of payments that with 6 jou will have to make is closest to 20 as bul eld a7 Examiner: Dr. Anthony Afful-Dadzie 166Index Namber ¢ second year his deposit 2 Ar. Banda will deposit GHy 300 tthe end of this sear. tthe end ofthe 3 co ger is dept Will increase by 13% per year for next 15 years, Assuming fate of interest © annually, what will be the present value of his deposit? a. 41739 b. 1250 ©. 1339.29 4.3913 e. None of the above ‘4 What effective interest rate per annum corresponds to a nominal rate of 12% compounded monthly? 2.1% b. 123% 127% 413.2% ©. 13.8% 5. The cost of a new combine cycle gas thermal plant to meet growing demand 7 years from today is estimated to be $650,000. Atan interest rate of 14% annually (i.e. every 6 months), every 6 months is closest to? per year compounded semi- ‘he uniform amount that must be deposited into a sinking fund a$28824 b.$30287 cc. $15144 .$ 150219 e.$75109 2 Examiner: Dr. Anthony Afful-Dadzie Seeunter ay Logistics is considering launching a new delivery service, The maiket could be excellent san anstable with fespestve revennes of GHE30,000, GHe20,000, GHE15.000 2 month we pcbabiliy OF he market conditions being excellent, and unstable is 0.2 and 0.3 respectively. ne ‘ernie Would incur a fixed cost of GHC 2000 per month, what is the expected monthly tum? 1.GH#6500 b. GH¢9500 .GH¢11500 d. GHg15500 e. GH¢23000 sete Simpson's rule to evaluate folowing integral: J) (4x* + 4)dx, assume n=4 2 M33 b.31.33 ©. 53.33 4.48.33 ce. None of the above 10. Two fair coins are tossed. What is the probability that no head will occur? ee b.12 cM 4.08 e. None of the above 4 Examiner: Dr. Anthony Afful-Dadzie 168Index Number Formula sheet Chain Rule: 2 = 2 . & Single value: F = P(1 +i)" ax au ax Annuity: = Aloo" pat F coo Gradient part of an arithmetic gradient k faso"-mwier Py =X [Otway eae] fa+o"-4] Geometric gradient wheng #i Py =a] when g = Where; g = growth rate (rate of increase) i interest rate Perpetuity/Capitalized cost Nominal and effective iy = (142) Expectation EQ) = PGrda: Var) = YE PODba- BOOP ; Examiner: Dr. Anthony Afful-Dadzie IaYt sex Number Signature a UNIVERSITY OF GHANA (All rights reserved) END OF SEMESTER EXAMINATIONS: 2016/2017 UGBS 202: BUSINESS MATHEMATICS (3 credits) qHREE HOURS version 1 ynsTRUCTI IONS: Answer ALL questions in both section A and section B. All questions must be answered on the question sheet. Carefully plan your answers to fit the spaces provided. No vrei will be given for an answer with no work shown, section A (25 marks): this section contains 10 questions. Show your workings in the space provided ‘and circle the correct answer. Each question carries 2.5 marks. 1. oppose a demand function is given by the relation P(q) = 500 — ity ed ste price. Which of the following is true about Ahab ey “Price is inversely related to quantity ‘Asdemand increases price decreases iii Price and quantity are equal for any integer ji The function that relates quantity and price is @ linear function 4) The domain of the function is restricted to positive real numbers Aionly B. i, ii and iii only C. ii, iv and v only Diiviiandivand vonly EE. i, ivand v only 2 Find the derivative of the function y = In(4x? + 3x + 4) when x = 1 Al B.1S7 C25 D.3 E138 "tolas taniners:Dr_ A. AffulDadze, Dr A. Karim, and Me. D. Agozie 20Signature...... Index Number: 0... . 3. Which of the following are true about Net Present Value (NPV) and Internal Rate of Retuyn (IRR) techniques? 2 i Both the NPV andthe IRR are investment appraisal tools Al NPV can be used to appraise two mutually exclusive projects regardless of any differences iy their lifespan ili. One should be careful when using IRR since it can lead to incorrect investment decision ¢specially when the cashflow is non-conventional (ie. cash flow consist of both positive ang non-positive values) iv. When IRR is greater than NPY, it means the investment is profitable. V. NPV and IRR both rely on time value of money. A.i,and vonly Bi, ii, and iii only C.iiiiiv,andv D.ijiiiv Ei, ii, and v only 4 Find the integral of (93 +2) ay years, how much will his monthly mortga ly payments for fifteen ige payment be? A. 2109.64 B. 12,501 Page 2 of 13, C. 257407 D.17341.09 E. 18,347.2 Examiners: Dr. A, Afful-Dadzie, Dy. A. Karimu, and Mr. D. Ago? 9)Signature........ wat ti in the stock market. He has the following three stocks i |B, and C. He understand: elo keesoe! Is that the economy could be in a state of Recession, 6. ook Sid a m, or in Depression. He also i . estimat F i vee return on each stock is given below; ————— Siate of the Econom A B Recession a 5 20% Y Normal 30% Tm % oom 50% %, os Depression 20% % S phot are the expected retums for stocks A, B, and C respectively? ‘A. 10%, 22%, 18% B. 17%, 13%, 10% C. 17.5%, 5.5%, 4.5% D. 35%, 23%, 25% E.1T%, 5%, 7% 2. Use the Simpson rte to evaluate the following integral: J Fpd assumen=4 A303 B.0474 03783 ASA BLS Page 3 of 13 Examiners: Dr. A. Afful-Dadzie, Dr. A. Karimu, and Mr. D. Agozie IZSignawre.... index Numbers i financial appraisal, Use ‘The table below has information on the cash flow of a project under fi PPralsal. Use the to answer question 8 and 9. [Cash flow (in GHO)_| 00 First cost 210 0 Annual revenue 37,000 ‘Annual operating cost f Useful life : oe 8. When will the project breakeven, assuming interest rate of 0%' A-dyears B.Syears C.6years D.8 years E. 10 years 9. What isthe net present value ofthe project at an interest rate of 10 percent per year? A.GHC210,000 B. GHC19,000.2 C. GHC94,000 D. GHC17,555 E. GHC48,071.82 10. The table below has data on wages Paid to four groups of workers and the number of workers in each group. Compute the current w ighted wage index of year 3 using year | as the base year YEARI YEAR YEAR3 Groups _| WAGE | No.of Workers | WAGE No. of Workers | WAGE | No. of Workers Managerial | 300 40 330 30 390 70 Skilled 255 60 270 70 270 70 Semi-Skilled | 195 60 240 60 270 70 Labourer 90. 100 150 100 240 80 A1206% B98. 250% C.175.6% = D.117.1% BL 141.2% Page 4 of 13 of eto ; / F Signature... the next OO questions using th ‘ion on on 1g the information on the two materi a terials (Matl and Mat2) First cost mt Mat2 irs = GH¢ 70,0 spent cost per year ~GHE 6 ~ = GH¢ 300,000 End-oF life disposal ~GHE3 000} — GHe 1,800 Tifeveats) 7 @ i | worth of Mi g,Find the ann fat Land Mat 2 Pee ree over their entire life. Assume interest rate is 10% 4 Mat 1:-GH#36,619.9 and Mat 2:-GH¢48,000_b. Mat 1:-GH¢28,729 and Mat 2:-GHE31,800 «Mat 1:-GH¢24,023 and Mat 2: GH¢30,180 4. Mat I: (G#1g24,023 and Mat 2: GH#30,180 10. Based on annual worth analysis, Mat 1 should be selected. aTrue b. False 11. Bsi a doll maker from Takored se interested in the mass marketing and production of a ceramic doll of her own design “alled Oman. The initial investment required for plant and [Labour and material costs are approximately GHE0.2 equipment is estimated at GH¢25000. per doll. If the dolls can be sold for GH¢0.4 each, what volume of demand is necessary for the Oman doll to break even? c. 500,000 d. 125,000 e. 100,000 2. 166,666 250,000 4 Examiners: Dr. A. Afful-Dadzie and Mr. D. AgozieSignature... Index Number: . Parrett 6. Suppose a firm's average cost function is 3q?—4q +6 +77; determine its marginal cost when output q is 50 units. a, 22106 b. 365400 1. 365302 4.892 e, 105410 ; 3 a 7. Use the trapezoidal rule to evaluate the following integral: J (4x? + 6)dx, assume n= 4 a. 251.10 b.31.38 ©. 39.36 4.62.75 ©. 100.8 8. A business faces a demand function of p = 151 —3q and cost function of TC = 2q? +4, where p is the unit price and q is the quantity of product. At what output level is profit maximized for this business? a. 120 b.25 ©. 48 dis e355 3 Examiners: Dr. A. Afful-Dadzie and Mr. D. Agozi¢ze «Number - Signature... nde changes in market behaviours, the pctoenanges in haviours, the management of EDS Company decided to change thei wives re ve their price indices. The price indies pipe me one Mole below for the wo ase periods. Use the infomation o answer questions 1 2nd 13 Too sé [7 Tndex 1 [100 [143 | 167 [a 8 01 | 205 | 366 index2 | ¥ [69.8 [sis | 98 [100 ot ae 6 12. What is the index value for x in year 8? a. 348.5 b. 310.3 ¢, 320.3 d, 365.3 €. 379.2 13. Ifthe company made a profit of 7.60M in year 3, how much did it make in year 7 c. 14.60M d. 13.05M ¢.35.2M a, 20.50M b. 25.21M. Examiners: Dr. A. Afful-Dadzie and Mr. D. AgozieSignature. Index Number: .. 14. The table below gives the price of four commodities in a four year period. Year a Commodity 2010 2011 2012 i ‘Wheat B B 24 # Rice 24 40 36 B Sugar 25 28 28 B Beans 81 84 90 Using 2010 as the base period, find the mean price relative index of 2012. a. 104.35 129.41 0.140 4,112.87 e. 164.21 15, Wilshaw Associates is considering launching an entirely new service. The market could be excellent, stable or unstable. If the market conditions to this service are excellent they will make GH¢30,000 @ month;. if market conditions are stable they will make GH¢10,000 a ‘month, and if conditions are unstable they will lose GH¢15,000 a month, The probability of the market conditions being excellent and unstable is 0.2 and 0.3 respectively. What is the standard deviation of the expected annual return? a. GHE161280 —_b. GHgs198400 ,GH¢126996 d.GH¢132000 —_e, GH¢51000 6, Examiners: Dr. A. Afful-Dadzie and Mr. D. Agozie- ae Signature... o 2 - “ pease all three questions in this section, jo = sO gl io a ye idenbeind he Internal Rae of Return’ ORR) conse @ mars) ? w y with a Minimum Acceptable Rate of Retum (MARR) of 12% per year is struction of a harbour under a Build-Operate-Transfer (BOT) n in each of those years (years starting in A compar; dering bidding for the co repent construction will fake 5 years and will cost $10 millio 5 net ‘revenue from operating the harbour is expected to be $5 million per year 7 ll the end of the BOT agreement in year 50. = What is the net present value (NPV) of the project for the interest rates of 5% per yeat? (6 i marks) Examiners: Dt. A- ‘Afful-Dadzie and Mr. D. Agozie xaminers: Df-Signature. Index Number: ....... fo fi ii, What is the project's payback period under a rate of return of 0% per annum after construction? (3 marks) iii, Based on the projected cash flow, what is the maximum rate of return (i. IRR) to be eamed from the project? (6 marks) iv. Is the project worth undertaking by the company? Explain. (2 marks) 8 Examiners: Dr. A. Afful-Dadzie and Mr. D. Agozieee ee Signatu penne cuesto® . When Lucca ait round trip is $600, British Airways attracts 500 wes gaily. thas sat at the number of bookings decreases linearly with ticket ce that a zal ou price attracts an additional 100 bookings. Assume the Mere en st for each trip is $50,000 irrespective of the number of ws -s on board. Also, the company has to pay $150 insurance for every passenger on board. ae gra undp cannot be les than $300, whiles if the price is more han $850 there ie pr wbe®® customers. Let q and p be number of bookings and price per ticket respectively. equation relating number of bookings with ticket price. (Hint: Find first the ind the linear i Tine). (8 marks) 4. slope ofthe equation p. Find the Revenue function R(q) and the cost function C(q). (6 marks) ¢. Find the profit function ™. (4 marks) Examiners: Dr. ‘A. Afful-Dadzie and Mr. D. AgozieSignature. Index Number: ....... saa a imi: fit? (7 marks} 4. What price should British Ainways charge for a round trip to maximize profit? ( ) Question 3. The CEO of Asempa farms limited is considering whether to plant this year's yam with a fertilizer or go organic (.e. without fertilizer). Incase of using a fertilizer, 10kg of either the Platinum or Standard type fertilizer would be needed at the start ofthe planting year. ‘The Platinum type is GH¢1000 per kilogram and could lead to a high yield of 30 tons or a moderate yield of 20 tons of yam at the end of the year. The Standard type is GH¢800 per kilogram and could also lead to a high yield of 15 tons or a moderate yield of 10 tons of yam at the end of the year. The Standard has fewer chemicals and would lead to tastier yam that sells for @ higher price than that of Platinum, There is probability of 0.7 that high yield would be recorded this year. Market price for yam is uncertain and depends on the type as well as the volume of yam on the market, Generally, a year of high yield results in higher volume whiles a year of moderate yield leads to moderate volume of yam on the market. Even then, there is 60-40 chance that yam from the Platinum fertilizer could sell fr GH¢2000 or GH¢2400 per ton in times of high yield, and GH¢3000 or GH 3500 per ton in times of moderate yield. ‘The Standard fertilizer yam has a 40- 60 chance of selling for GH¢4000 or GH¢5000 per ton in times of high yield, and GH¢5500 or GH¢6000 in times of moderate yield. If Asempa farms decide to go organic, it will need the supply of manure every month from a local shop at a total cost of GH¢7,000. This could lead to a high yield of 8 tons or a moderate Yield of 6 tons. Prices for organic yam are quite high and will sell for GH¢8,000 per ton in a high yield year and GH¢10,000 in moderate yield year. Ignore time value and answer the following questions, - Examiners: r. A. Afful-Dadzie and Mr. D. Agozi¢Signature... tree for the problem faced by the CEO indicating the probabilities of values of events. (10 marks) - 4 decision p10" yd monetary iSignature Index Number: .. to take if he is risk neutral and would 'b. Advice the CEO of Asempa farms on which decision que. Show your work. (8 ‘want to make his decision based on expected monetary value techni marks) ¢. Will your advice change if the probability of high yield is 0.47 Show your work. (4 marks) 4. What would be Asempa farms payoff if there happens to be a high yield and price of yam is GH¢4000 per ton? (3 marks) Examiners: Dr. A. Afful-Dadzie and Mr. D. Agozi¢‘UGBS 202 (2014/2015) Formula sheet ot oe ae > ric a Theat -priceIndex: Ly = ate [ sre Trane! Quantity Index: Lg hia = teainPay n poset Pree MEEK: P= FEgyph Quan Inder: Oy Batata Taio, gogeone = P4D" snot | er et{at o-0) casi part ofan arithmetic gradient Geometric gradient 1+ (=) + wheng #1 n : = Aled wheng = Where; oe = growth rate (rate of increase) interest rate Perpetuity/Capitalized cost A P i Nominal and effective nm i= (142) -1 Expectation E(x) = Dy Ped Var(2) = By P@DLx — FOOT?yr ube wore oe Nes OF GHANA Tights reserved END oF bie SEMESTER EXAMINATIO : BUSINESS MATHEMATICS Geet it vet version 1 ion A and section B. All questions must 5 G) HOURS pine UCTIONS: Answer ALL questions from both s ‘plan your answers to fit the spaces provided. ‘an ‘ered on the question sheet. Carefully uh ant formulae and tables are provided. (20 marks): This section contains 10 multiple choice questions, Show your work ir in section AOD : vided and circle the correct answer. Each question carries 2 marks. marl shespace Pr 1 find fp + Dd Ald B30 6.3 D.3.5 E45 2. Given the function. r(q) = 100q + 2q?, what is the point at which dr/Aq is zero, and is this point a relative maximum or minimum? 50 and relative maximum 25 and relative maximum A.q=—50 and, relative minimum C.q=~25 and, relative minimum E. q=50 and relative maximum B.q Daq= 3. The Marginal Revenue function for a manufacturer's product is 2 = 100 ~ 109. Find the unit price p for g = 15. A E © Bo GS ps B40 Examiner: Dr. Anthony Afful-DadzieNumber; . 24? 4, What is dy /dx of y = In(x? + 4)? for # 05 A.08 B 0.65 C52 D.3.52 E. —2_ dee using three trapezoids. 5 5. Find the area under the curve y = J 3 A. 2.03 B.1.90 €.0.55 D. 3.80 E122 ? j ire an initial capital outlay of Ghe 40,000 for plant and 6. A company’s new project would require an initial capital outl c 000 f : equipment, Labor and mate oss ae approximately Ghe 10 per unit of production. Ifa unit can be sold for Ghe 50 each, what volume of demand is necessary for the company to break even? A. 2000 B. 1000 C. 500 D. 4500 E. 450 7. Demand for electricity next year is projected to be either one of the following quantities: 18,000GWh with probability of 0.4, 25,000GWh with probability of 0.4, or 30,000GWh. If this year’s demand is 15,200GWh, a » what should be the additional amount to plan against ifthe enery ministy would want fo plan fo the increase using expected value analysis? A.7000GWh —B.S000GWh ©. soo0Gwy D.25,000GWh —_-E. 23,200GWh 2 Examiner: Dr. Anthony Afful-Daézieze jndex company buys two products with features : ake con S ghted price index. Assume year | as the base oat. in the table below. Calculate the base- Number f humeral (item ear | Ye Price paid per unit e 20 a Yerl | _ Year? B a $i 10 | 15 3 i eeeer a.agasye —B.10081% —.1205% 10307! 95.17% o. The city of New York is thought to have been bought fr SI four h i i wundred years ago. Ifthe > rage interest rate in the U.S. has been roughly 7% ; y ; avige ofthe price ped in the current period? ly 7% per year since then, what isthe equivalent A.5.488794 * 107, B. 6.2584* 10°, C. 4.5872 + 107°, D. 10.2584 + 10"* E. 5.66906 + 10°* 10. The academic fees of the University of Ghana (UG) is set to increase by 10% per Year for the next 3 years. If this year’s fee is Ghe 1200, what would be the present value of the total fees paid up to year 4 by a newly admitted student if interest rate is set to remain at 10% per year compounded annually? Assume payment is made at the beginning of a period. A.4363.636 —-B. 3636.36 4752475 p.4472.723 _ £.5940.594 eee eee aa ARIIndex Number: . Section B: Answer all four questions in this section. Question 1. A-Plus mechanical Inc. wishes to evaluate two alternative machines for an pPcoming engineering project. The cash flows for the two machines are shown in the table below. Assume the company uses a minimum acceptable rate of return (MARR) of 8% per year compounded quarterly, [S—— Machine A___Machine B First cost Ghe -250,000 -370,000 Annual operating cost, Ghe per year —-40,000 ~50,000 Life, years 3 5 a, 2 marks) Calculate the effective annual interest rate of the company’s MARR. b. (8 marks) Which is the best altemative based on annual worth analysis?Fr jndex ‘Number: - «on 2. A cement wholesal question esaler buys his the first 200 units. Ho S his goods from G : 0 a Sonal units — tis price is tee Ghana Limited at a cost of Ghe qu! above 200, Fi yy an amount of 0.001 times the "100 + 300 * 19.7 = 9910. Ord . For example, the : ar. |. Orders can , the cost of ordering 500 units i Jer. The ot be le tsis a wen i mae orders once in a Ge dan spies than 4000 units for ives. As will we mak srgroband is set atp = 24-0 Coat he sling price is @ Satara merle » Where 2 is the number of units of cements pees ina month. 3 (15 marks) What number of units should be ordered each month to maximize profit? (8 marks) What is this maximum profit? ¢. (2 marks) What is the profit ifthe wholesaler orders 3600 units and do you think this is worth doing compared to your answer in question babove? examiner: De. Anthony Affi DadzieIndex Number: ..... Question 3. The economy of Ghana next year is expected to be “Good, with a probability 0.25 ‘OK with a pro ability of 0.5, or ‘Worse’. According to market report ea Financial Times, cach $1 invested in IT startup funds on the Ghana Stock Exchange will yield a retum of 25%, 15%, or -10%, whereas each $1 invested in an Insurance fund will yield a zeturn of 15%, 10%, o¢ 5% respectively if the economy is Good, O.K or Worse next year. The US. economy is also expected to be Good, with a probability of 0.4, O.K with a 0f05, or Worse, Market reports indicate that, each $1 invested in IT startup funds on the Dow Jones Index of the U.S. will yield a retum of 15%, 10%, or 2.5%, whereas each $1 invested in an Insurance fund will yield a retum of 10%, 6%, or 2% respectively if the economy is Good, O.K ot Worse next year. Probabilisy ‘An investor has $20,000 and $40,000 respectively to invest in IT startup and Insurance funds, 4. (4.5 marks) Which of the two economies should be selected for investment in IT startup funds based on total expected retum?— Index Number! -.-. b.4 marks) Which of the two pased on total ex] economies sh¢ pected retum if i should be | and $120 respectively? wn if investment fees for «sees for investment in Insurance fur ? ance funds in Ghana ce funds and U.S. are “ 3250Index Number: ..... ; isk for investment in IT startup funds? c. (12 marks) Which of the two economies carries more risk for inves Show your workIndex Number: .. a marks) Which of the two economi assume the variance for Insurance re eel respectively, and ignore the i S under Ghana aa investment fees from questi na US. is 9,000,000, and 1049600 ion b above. e. (0.5 marks) In general, what does a coefficient of variation (Cov) implies? Examiner: Dr. Anthony Afful-DadzieIndex Number: ...... Question 4. The government of Ghana (GOG) is to decide next month whether to undertake a new yet promising oil exploration close to Cape Three Point in the Western region by itself or to sell the exploration right to Tullow Oil Company. Preliminary studies have confirmed an oil find in the area and there is a 70% chance large quantities of oil would be found. Self-exploration by the GOG will demand a one-time investment of $400M and will last for a year. After this, if a large quantity of oil is found, it may lease it at $160M per year to a foreign oil firm for 40 years or undertake self-production, Under self-production, there is a 50/50 chance that production cost would be high therefore yielding a profit of $70M per year for 40 years or $200M per year for 40 years if production cost is low. If however a smaller quantity of oil is found, it may lease to a foreign oil firm at an expected value of $50M per year for 20 years, “Tullow on the other hand has quite an interesting bid. Exploration will take one year and, ifa large quantity of oil is found, it will pay GOG $170M per year for 35 years if a new driling technology under research by Tullow’s R&D department is successful, but only $70M per year for 35 years if the technology is unsuccessful, If a smaller quantity of oil is found, it will offer GOG $70M per year for 20 years and $30M per year for 20 years if the technology under research is successful or unsuccessful respectively. There is a 75% chance the new technology under design would be successful. a. (10 marks) Draw a decision tree for the problem faced by GOG inchiding the probabilities of occurrence, the yearly profit, and the duration profit is received. You are encouraged to use pencil.“a ie Number: marks) lgnori ring time value 0 f mor ni ley, advice the ie GOG. on whicl th decisi sion to take. SI . Show ou work.Index Number: , ©. marks) C ‘forever’, If interest rate is expected to remain at 5% above change? Show your work. onsider all time periods ubove 15 years as sufficiently long to be considerea cach year, will your decision in question 5UGBS 202 (2014/2015) Formula sheet Brae, BhrPoytn, veyres: Price Index: L, e wasnt ? © Ther 4o;Poy Quantity Index: Iq = Tas dry ao Fetatas Quantity Index: Qq = Bienes passehe: Price Index: Py = 55 7 4 Anh Ter Png 40, single value: F = POL+()" Annui Apa! otal reftator y Gradient part of an arithmetic gradient ——fa+pr-nin- 1) P= EGO Geometric gradient 1+9)" 1-(Fi i-g Prp=A when g #i P= Ala “I: wheng =1 Where; g = growth rate (rate of increase) interest rate Perpetuity Nominal and effective m ig = (145) =1