Finance 101: Module 3 Assignment - Time Value of Money Problems

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FINANCE QUESTION
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Table of Contents
Question 1...........................................................................................................................................3
Question 2...........................................................................................................................................4
Question 3...........................................................................................................................................5
References...........................................................................................................................................6
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Question 1
(a) Interest rate: 14%
Monthly interest rate will be 1.167% (0.14/12).
Effective interest rate will be equivalent to the 14% since no. of compounding is one in the year.
(b) Interest for the period of 2 months: 4000*2/12*1.167*2 = 93.33
(c) First of all, effective interest rate needs to be computed which comes out to be 9.31%.
Thereafter, the future value comes out to be 10,931.
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Question 2
(a) Present value will be determined from the continuous compounding formula:
Present value = 60000/3.668 = 16357.69 assuming that payment will start after the three years.
(b) Present value of RM 50000:
Future value of RM 50,000 per annum will be 10,00,000. Now, present value of 10,00,000 will
be determined.
Accordingly, the present value will be 51387.46.
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Question 3
(a) Type S:
Present value of cash outflow: (9000*5)/3.791 = 11870
Present value of initial cash outlay: 23000
Total present value: 34870
Type R:
Present value of cash outlay: (7000*5)3.791 = 9232.39
Present value of initial cash outlay: 31500
Total present value: 40732.39
It is advisable to go for Type S project due to its lower cost.
(c) Present value of initial cost: RM 150000
Present value of additional cost: (120000*5)/3.99 = 150375.94
Present value of recurring expenditure: (71400*10)/6.71 = 106408.34
Total present value = 406784.28
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References
 Rustiarin, W.N., & Sunarsih N.M., 2017, Factors Influencing the Whistleblowing Behaviour: A
Perspective from the Theory of Planned Behaviour, Asian Journal of Business and Accounting
10(2), 2017.
 Silva, D.R.G., & Sousa D.G.R., 2017, The influence of the anonymous whistleblowing channel
on accounting fraud detection in organizations, Revista de Contabilidade e Organizações 30
(2017) 46-57.
 Liu, S., 2017, An Empirical Study: Auditors’ Characteristics and Audit Fee, Open Journal of
Accounting, 2017, 6, 52-70.
 Smii, T., THE IMPACT OF THE AUDIT QUALITY ON THAT OF THE ACCOUNTING
PROFITS: THE CASE OF COMPANIES LISTED ON THE TSE, International Journal of
Managing Value and Supply Chains (IJMVSC) Vol. 7, No. 1, March 2016.
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