Assignment Task:
Part A:
Excelsior Limited has the intention to purchase a new photocopying machine and has a choice between the following two machines:
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|
ASUS
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XEROX
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Initial cost
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Rs 120 000
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Rs 120 000
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Expected economic life
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5 years
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5 years
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Expected disposal/residual value
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Rs12 500
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0
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Expected net cash inflows
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Rs
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Rs
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End of: Year 1
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-
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35 000
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Year 2
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48 000
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35 000
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Year 3
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37 000
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35 000
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|
Year 4
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39 000
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35 000
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|
Year 5
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31 000
|
35 000
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The company estimates that its cost of capital is 9%.
Required:
Q1: Calculate the payback period for both machines. (Answers must be expressed in years, months and days)
Q2: Calculate the discounted payback period for both machines (answers in years, months and days)
Q3: Calculate the net present value for both machines. (to the nearest Rupee)
Q4: the Profitability Index for Machine ASUX.
Q5: Calculate the Internal Rate of Return for both machines (Use interpolation to arrive at your final answer.)
Q6: Write a brief report to the management to determine whether the company should buy any photocopying machine.
Part B:
Q1: Mr Bruce deposits Rs 500 every month for 10 years in his saving account paying 8 % interest per annum. He wants to determine how much sum of money he will have at the end of the 10th year if interest rate is compounded:
i) Annually
ii) Quarterly
Q1: Mr Willis would like to save a sum of money for his newborn son's college education. How much must he deposit in a savings account now if the account grows at a rate of 7% a year and he desires a balance of Rs1,200,000 eighteen years from now?
Part C:
"Finance is crucial....."
With reference to a business of your choice, evaluate the validity of the above statement.
Business Economics
Question 1:
(i) The demand and supply functions for a good are given by
D = 50 - 0.5P and S = 20 + 0.25P (Where P is price)
Q1: Calculate quantity demanded when price is Rs 10
Q2: Calculate quantity supplied when price is Rs 20
Q3: Calculate the equilibrium prices and quantities.
Q4: Calculate the shortage/ surplus if government imposes a regulatory price of Rs 60.
Q5: If the demand curve shifts to D′ = 100 - 0.5P, compute the new equilibrium price and quantity.
Q1: With the aid of examples, explain and illustrate price elasticity of demand and income elasticity of demand.
Q2: Using these concepts explain and comment on measures which might be taken to increase the revenue of a typical small business in your country.
Question 2: Compare perfect competition and monopoly in respect of price, output and profits.
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