» 2 » 4 8 8) » 10) 11) 12) CA Umesh Bhattarai TIME VALUE MONEY poe ‘Yanstout Autos ofling te ee ona motoryle eating Rs 100.000 fr whieh Re 4,000 should be pad a8 cash Gown Payment and rest tte endof 2 yeas, Badbas Auto wl giv RS 5000 fh at pie for the sare motorcycle but <£es no ofr re coat Which company is fering the batter dealt buyers it meet mmretrate is 10%? EXE Lid borows Ra 4360000 rom EYE Lid at a stnle ret rl of 12% pa. hie opoed tat the loan shal be payable in two qe sainets which shal be payebia athe end of 6 menhs and year reepecvely. Calculate the ‘amountof instalments, ‘esa thal yu ae offered an anuly that pays Rs, 1,00 athe ond ofeach year for 40 years, You could eam 6% on Your money in other Investments wth qual isk. What isthe most you should pay forthe annuity? Ifthe payments began Immediately, how much would the annuty be worth? NCC Bank granted a losn of Rs. 6, 34,000 repayable in 4 equal annua instants beginning with the date of sanction of ‘ne oan. Determine the amount of stalinents if otectv rae ofinaestis 18% pa. ‘You plan to make a series of deposits in an interest bearing account @ 10%. You will deposits Rs. 1000 today, Rs 2000 at {he end of year 2 and Rs 8000 atthe end of ‘year 5. I you withdraw Rs 2000 atthe end of year 3 and Res 6000 at the end ofyear 7. 5 Required; a (Present value (iTeminal value ‘Abank granted a loan of Rs 1234,800 repayable in 4 annual nstatnents in th rato of 1: 2:3: 4 respectively, wih fhe ond of tstyear.Detemine the amount of instalments Hf effective rate of terest 18% pa. ‘You borrowed Rs 100,000 @ 9% pa. Ifyou Pays Rs 10.000 per year, how long tothe nearest year you wil repay the loan? beginning Me. X has made real estate investment for Rs, 12,000 which he expects wi have a mtuty vale equivalents invest t 12% compeunded monty for § years, I mest savings Instutlonscuenty pay 8% compounded quartet on 2's year ‘erm, whats the least amountfor which Mr.X should sel his property to get expected matuty valve? You are given the folowing information: @ FutureValue = Rs 2000 Present Value =Rs 1000 b. Nootyears — =7 Interest Rate 0% ‘A doctor i panning to buy an X-Ray machine for his hospital He has two optons. He can either purchase & by making ‘cash payment of Rs 5 lakhs or six equal annual instalments of Rs. 102,000 p.a. Which option do you suggest tothe doctor assuming the rate of return is 12 percent? You must take Payment of Re. 1,492.02 ten yoars fom today. To prepare for his payment, you wil make § equa! ]. 7 500,000 550/000 6,00,000 z 40000 640,000 3 580,000 %,90,000 a 620,000 740,000, = 660,000 300,000 “The taxrato ie 40 per cent. The company follows straight line method of depreciation, Assume cost of capital to be 15 per cent. P.VF. of 15%, 5 = 0.870, 0.756, 0.658, 0.572 and 0,497. ‘You are requied to advise the company as to which alternative is to be adopted. 56) A theatre with some surplus accommodation proposes fo extend its catering facilis to provide ight meals to its patrons. ‘The Management Board is prepared to make inital funds availabe to cover capital cost. It requires that these be repaid over @ 1% and discounting factors at this interest rate are indicated below: 7 z 3 a 5 Discounting factor Tp 08s | arr uaF ae “The capital costs are estimated at Rs 60,000 Tor equipment ti ‘of five years and ho residual value. Running costs of staf, et, will be Rs 20,000 in the year, increasing ich subsequent year. The board proposes to charge Rs 5,000 per annum for lighting heating and other property expenses and wants a nominal Rs 2,600 per annum to ‘cover any unforeseen contingencies. Apart from this, the Board is not locking for any profit, as such, from the extension of these facities, because it believes that this wil enable more theatre seats to be sold. It i proposed that costs should be recovered by setting pices forthe food at double the direct costs, Its not expected thatthe level wil be reached until year 3, The proportions of the level estimated to be reached in years 1 and 2 are 35% and 65% respectively You are requied to: Caleuate the sales that ned to be achieved In each ofthe fve years to meet the Boards targets. Ignore taxation and inflation, ‘Ans: Full Sales = Rs.128, 449 57) A company is considering the purchase of a new comput Would cost Re 35 Lakhs. The operation and maintenance cos ‘The estimated Ife of the system i 6 yoars, ‘The system wit result In reduction in design and draughtsman-ship cost to disposal of used drawing offi equipment and furniture Is antipated there is no fx on capital pro m for Its Research and Development Dhision, which 'in9 deprecation) are expected tobe Rs 7 Lakhs pa OFRS 12 Lakhs annually, Also, the 9,00.000. ts book value is Nit ang 44. CA Umesh BI Woe 100% wia-f ne fst Yar or tx pues, The companys orectne ‘of the proposal. BCD Lid, specializes in production of sig abl water fr which has dstbutors bot nth Norham and Southern parts roduc in the East a 1 West parts of Nepal ar clamoring for more branches in each of tese ject team to study the fe irement. The team, afer serious ‘of the branch expansion project as well as submited Is report containing the fotowing infomation ‘lating tothe branch to be opened in the 150,000 with nil serap value Expected ie span - 10 years Sales volume - 20,000 uns per annum Selling price. 20 per Direct variable cost -R. 18 per unit - ~ Fixed cost excluding dopreciaton - Rs, 25,000 per annum. IRR -17%. aa Ariaontek ‘The Mansging Oreos concomed about “tity of project sth IRs clos othe company's Missa rte os 15% estes wanted you to eval th project very wel so att does stoma ee Present value of annuily at company's hurdle rae or 10 years is 50188 Required: ‘be Compute the sensitvy ofthe NPV to each ef the folowing variables: Sales price Sales volume Inital outay Variable cost Discount rate Life of project From your calulaton in () above, determine the two most senskive variables and interpret the result. ‘Ans: Most sensitve-Seling Price and Variable Cost ‘ADJUSTED PRESENT VALUE- APV 59) XYZ Ltd. is pres Which wil require Gaul) financed. The drecto ofthe company have been evaluating investment in a Project, ns capa expenditure on new machinery. Thay expec the capital ivestnent o prove seal cash fows of 42 lakhs indefiitly, which is nat of al tax adjustments, The discount rte, whieh ‘applies to such Investment decisions, is 14% net. ‘The directors of the company believe Propose to finance the new project wi ecured on the company’s assets, The company intonds the ater tax costo sue, corporate undated debt of similar risk is 10%, The ater 1s 20%, Investment, £0) A company uses certainly equvalnt approach to evaluates risky projets thas colected the following detais for a _Pfoject which Is under consideration; 3sject to manufacture and sell a new product. The i. The annual fixed Wenn conoay i canon wie year and on the assumption that wit 16