Accounting

    Question 1: Calculating future value in a compound interest formula. Samuel invested $30,000 at 9% effective annual interest rate for 6 years. Calculate the future value of his investment. Question 2: Calculating present value in a compound interest formula. David would like to have a savings of $14,000 in an account at the end of five years. Calculate the amount he needs to save now if the savings account earns an annually effective rate of return of 4%. 2 Question 3: Calculating effective interest rate in a compound interest formula. Jennifer borrowed $16,000 from her best friend, four years later, Jennifer repaid her $20,000. Calculate the effective annual interest rate. Question 4: Calculating number of periods in a compound interest formula. Edward invested $12,000 in a fund offering a rate of return of 4% per year, approximately how many years will it take for the investment to reach $15,000? 3 Question 5: Calculating yield to maturity in bond valuation. John bought a bond on 1 July 2010 for $45,644.74 with a face value of $50,000 on 1 July 2016. The coupon rate is 8% per annum. Estimate the yield to maturity 4 Question 6: Capital Budgeting. Alpha Limited is planning on investing in a new project. This will involve the purchase of some new machinery costing $100 thousands that will be fully depreciated over 5 years. The salvage value is zero at the end of year 5. Alpha Limited expects to receive cash flows of $50 thousands at the end of year 1, $40 thousands at the end of year 2, $30 thousands at the end of year 3, $20 thousands at the end of year 4, and $10 thousands at the end of year 5. Alpha Limited expects to receive net income of $10 thousands at the end of year 1, $9 thousands at the end of year 2, $8 thousands at the end of year 3, $7 thousands at the end of year 4, and $6 thousands at the end of year 5. The weighted average cost of capital is 14%. 1. Calculate net present value (NPV) for this project. 2. Without calculations, the internal rate of return (IRR) for this project is ………… a. Greater than 14% b. Less than 14% c. Equal to 14% d. Cannot be calculated 3. Calculate modified internal rate of return (MIRR) for this project 4. Calculate profitability index (PI) for this project. 5 5. Calculate payback period (PBP) for this project. 6. Calculate discounted payback period (DPBP) for this project. 7. Calculate accounting rate of return (ARR) for this project.