FIN2603 ASSIGNMENT 2 FOR 2024

Question 1 Complete Marked out of 1.00 Flag question Question text ... is the interest earned on a given deposit that has become part of the sum at the end of a specified period. a. Simple interest b. Compound interest c. The interest rate d. The internal rate of return Question 2 Complete Marked out of 1.00 Flag question Question text At what annual interest rate must a single amount of R5 000 be invested for 5 years to yield approximately R7 500? a. 7.20% b. 10.76% c. 8.45% d. 9.86% Question 3 Complete Marked out of 1.00 Flag question Question text Ben Johnson has arranged for a 60-day loan at an annual interest rate of 7.5% per annum. If the loan amount is R1 000 000, how much interest will Mr Johnson pay in rand terms? (Assume a 360-day year.) a. R25 000 b. R75 000 c. R0 d. R12 500 Question 4 Complete Marked out of 1.00 Flag question Question text Calculate the difference between the following two investment proposals. (a) R1 401.82 invested annually for five successive years at 9% per annum. (b) R5 209.22 invested for five years at 10% per annum compound interest. a. R0 b. R 80.25 c. R100.35 d. R 36.10 Question 5 Complete Marked out of 1.00 Flag question Question text Calculate the future value (FV) of R15 000 invested for six years at an interest rate of 8%, compounded monthly. a. R26 734 b. R14 026 c. R23 803 d. R24 260 Question 6 Complete Marked out of 1.00 Flag question Question text Calculate the growth rate of the following stream of cash flows: YEAR CASH FLOW 2023 R 34 600 2022 R 31 000 2021 R 11 900 2020 R 10 000 a. 26% b. 51% c. 43% d. 23% Question 7 Complete Marked out of 1.00 Flag question Question text Calculate the present value (PV) of R100 000 received nine years from today at an interest rate of 12%. Interest is compounded monthly. a. R37 980 b. R34 142 c. R27 895 d. R43 998 Question 8 Complete Marked out of 1.00 Flag question Question text Samuel, the manager of an export company, wishes to replace a machine four years from now, with a new machine that will cost R150 000 in four years time. If equal end-of-the-year deposits will be made into an account paying annual interest of 10 per cent, calculate the size of the each deposit. a. R 45 345.78 b. R 23 535.24 c. R 29 382.38 d. R 32 320.62 Question 9 Complete Marked out of 1.00 Flag question Question text How much should Zimaza invest today at 9% interest per annum, compounded quarterly, to be able to buy a house worth R2 500 000 six years from today? a. R1 954 322.19 b. R1 465 616.71 c. R 672 971.33 d. R1 115 564.17 Question 10 Complete Marked out of 1.00 Flag question Question text Find the present value of the following stream of cash flows by assuming that the organisation has an opportunity cost of 11%. Years 1–3 : R25 000 Years 4–7 : R50 000 a. R 71 203.41 b. R174 516.94 c. R100 268.41 d. R155 268.41 Question 11 Complete Marked out of 1.00 Flag question Question text If Brett invests R5 000 at the beginning of each year at an interest rate of 8% over a ten-year period, the future value of the investment would be ... a. R60 000.00 b. R78 227.44 c. R81 000.00 d. R58 687.43 Question 12 Complete Marked out of 1.00 Flag question Question text Musa, the financial manager of an international company, wishes to replace a machine five years from now with a new machine that will cost R700 000 in six years' time. If equal end-of-year deposits are made into an account paying an annual interest of 11%, calculate the size of each deposit. a. R95 345.78 b. R23 535.24 c. R88 463.60 d. R49 382.38 Question 13 Complete Marked out of 2.00 Flag question Question text Patricia invests R1 000 annually (at the end of each year) for 5 successive years in a savings account at 9% p.a. compound interest. At the end of the fifth year she withdraws R984, 71 and the balance is invested at 13% interest p.a., compounded semi-annually for four years. The end value of the investment is closest to ... a. R6 655 b. R5 000 c. R9 655 d. R8 275 Question 14 Complete Marked out of 2.00 Flag question Question text Green Oak Ltd has made an initial investment of R500 000 in a new project. The firm’s cost of capital is 12%. The investment is expected to generate the following cash inflows over the next five years: Year 1: R 50 000 Year 2: R 60 000 Year 3: R150 000 Year 4: R140 000 Year 5: R300 000 The profitability index (PI) is ...; therefore, the investment should ... a. 1.09; be undertaken. b. 0.92; not be undertaken. c. 1.09; not be undertaken. d. 0.92; be undertaken. Question 15 Complete Marked out of 1.00 Flag question Question text Metropolitan has a cost of capital of 13% and it is evaluating three capital projects. The internal rates of return are as follows: PROJECT 1: 12% (IRR) PROJECT 2: 15% (IRR) PROJECT 3: 13% (IRR) Metropolitan should ...____ a. accept project 3 and reject projects 1 and 2. b. accept project 2 and reject projects 1 and 3. c. accept projects 2 and 3, and reject project 1. d. accept project 1 and reject projects 2 and 3. Question 16 Complete Marked out of 1.00 Flag question Question text Remix Ltd has made an initial investment of R1000 000 in a new project. The firm’s cost of capital is 13%. The investment is expected to generate the following cash inflows over the next five years: Year 1: R 50 000 Year 2: R 60 000 Year 3: R 70 000 Year 4: R400 000 Year 5: R500 000 The Net present value (NPV) is ... a. R1 b. -R343 542 c. R343 542 d. R400 879 Question 17 Complete Marked out of 2.00 Flag question Question text The financial manager is evaluating a proposal for a new project with a cost of capital of 13.5%. The cash flows for the project are estimated as follows: Year Net cash flows 0 -R 2 000 000 1 R 850 000 2 R 750 000 3 R 650 000 The NPV is ... a. -R161 381.00 b. -R224 349.60 c. R181 385.00 d. R203 000.00 Question 18 Complete Marked out of 1.00 Flag question Question text The minimum return that must be earned on a project in order to leave the firm’s value unchanged is the … a. interest rate. b. internal rate of return. c. compound rate. d. discount rate. Question 19 Complete Marked out of 1.00 Flag question Question text The payback period should ideally be ... a. as long as the duration of the project. b. longer than the duration of the project. c. as long as possible. d. as short as possible. Question 20 Complete Marked out of 2.00 Flag question Question text A company has financed 45% of its assets through a 11% after-tax cost of debt loan. The remainder of its assets are financed through equity. The firm’s required return on equity is 16%. Calculate the company's weighted average cost of capital (WACC)? a. 13.75% b. 11.25% c. 43.56% d. 28.50% Question 21 Complete Marked out of 1.00 Flag question Question text The after-tax cost of debt for a firm, which has a marginal tax rate of 35%, is correctly calculated at 6%. Calculate the before-tax cost of debt. a. 6.0% b. 17.1% c. 9.2% d. 8.1% Question 22 Complete Marked out of 1.00 Flag question Question text Risetoshine Ltd. has determined its optimal capital structure, which comprises the following: FORM OF CAPITAL WEIGHT AFTER-TAX COST Long-term debt 60% 5% Preference shares 15% 13% Ordinary shares 25% 10% The weighted average cost of capital is ... a. 9.65% b. 8.35% c. 11.43% d. 7.45% Question 23 Complete Marked out of 1.00 Flag question Question text A company has a cash conversion cycle of 50 days. Annual outlays are R10 million and the cost of negotiated financing is 9%. Calculate its annual savings if the company reduces its average age of inventory by 15 days. Assume 360 days per year. a. R125 000 b. R 15 679 c. R 87 500 d. R 37 500 Question 24 Complete Marked out of 1.00 Flag question Question text A company increasing its credit terms for customers from 2/15 net 60 to 2/20 net 90 will likely experience ... a. a decrease in the average collection period. b. an increase of cash in hand. c. an increase in the average collection period. d. higher net income. Question 25 Complete Marked out of 1.00 Flag question Question text A firm has a cash conversion cycle of 60 days, an average payment period of 30 days and an average collection period of 60 days. What is the firm’s average age of inventory? a. 150 days b. –90 days c. 0 days d. 30 days Question 26 Complete Marked out of 1.00 Flag question Question text Calculate the EOQ based on the following information: 21 000 units used annually, purchased at R65 per unit. Order cost is R340 per order. Carrying cost is 9% of inventory value. a. 1 614 units b. 1 633 units c. 1 599 units d. 1 562 units