Question

For the following numerical problems, detailed worked answer problem, form formula entered using the MS Word formula function. s must be shown. This involves providing a brief description of the ulae used, progressive and final answers. For assignments you are expected to show your workings using the appropriate (a) You WISh to go on an overseas family holiday in 15 months time which will cost $20,000. Ifyour financial institution is offering you 6% pa (com holidays? (5 marks) pounded monthly), how much do you need to deposit in your account each month in order to save the required amount before you go on Imow luln u ysu Reed to deposit in your account each month in order to save the required amount before you go on holidays? (5 marks) (b) You have been offered the opportunity to purchase a mining business investment which is priced at $16,000,000. The investment involves some start-up costs in the first years and some mine re-mediation costs after the project is completed in 10 years. The expected cash flows for the project are below and have an expected rate of return of 15% pa. you End of year Cash flow ($,000) 2,500 5,000 6,800 7,000 7,000 9,500 5,500 2,000 4,500 4 5 6 8 9 10 (i) Based on your required rate of return would you purchase this investment? (2.5 marks) (ii) What would the value of these cash flows be at the end of Year 2? (2.5 marks)

Answer 1

-PMT(6%)12,15,,20000,0) 1(a$-1,287.29 C4/1.15*B4 end of year Cash Flow ($,000) Present value 4 16000 16000 1 2500 - 2173.913043 -C6/1.15 B6 5000 3287.581162 3887.92207 3480.237147 3026.293171 3571.401879 5500 1797.959756 2000568.5248241 45001112.331178 2558.338144 and so on 4 10 9500 12 13 SUM(D4:D14) 10 15 16 NPV yes, Since the Net Present Value is coming greater than 0 value of these cashflows at the end of 2 years3383.402 in($,000) 18 (ii

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