Problem
A. Mr. X a financial analyst is considering about recommending that Mr. A invest in a piece of land that costs Php85 Million. He is convinced that next year the land will be worth Php91 Million. Given that the guaranteed interest rate in the bank is 10%, should Mr. A undertake the investment in land?
B. Ms. Reyes will receive Php10,000 three years from now. She can earn 8 percent on her investments, and so the appropriate discount rate is 8 percent. What is the present value of her future cash flow?
C. Honesty Corp has an opportunity to invest in a new high-speed processor that costs Php5 M. The processor will generate cash flows (from cost savings) of Php2.5 M one year from now, Php2M two years from now, and Php1.5 three years from now. The processor will be worthless after three years, and no additional cash flows will occur. Honesty Corp has determined that the appropriate discount rate is 7 percent for this investment. Should the company make this investment? What is the net present value of the investment?