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DSC1630 Assignment 4 (COMPLETE ANSWERS) Semester 2 2024 (234769) - DUE 26 September 2024
DSC1630 Assignment 4 (COMPLETE ANSWERS) Semester 2 2024 (234769) - DUE 26 September 2024
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,DSC1630 Assignment 4 (COMPLETE ANSWERS)Semester 2 2024 (234769) - DUE 26 September
2024 ; 100% TRUSTED Complete, trusted
solutions and explanations.
Question 1 Complete Mark 1.00 out of 1.00 QUIZ Sophie wants
to buy the Ever-so-Young shop around the corner. The following
cash fl ows are involved Time in years Cash fl ows (R) 2 200 000
3 –500 000 7 700 000 8 850 000 9 –210 000 Sophie can borrow
money at 19% per annum while she can invest at 17,5% per
annum. The present value of the cash outfl ows is a. R340
590,94. b. R357 407,06. c. R524 888,51. d. R535 703,05.
Question 2 Complete Mark 1.00 out of 1.00
To calculate the present value (PV) of the cash outflows, you'll
need to discount each cash flow to its present value using the
appropriate discount rate. Since Sophie can borrow money at
19% per annum, we'll use this rate for the discounting.
Here's how to calculate the PV of each cash flow:
1. For Time = 2 years, Cash Flow = -R200,000
PV=−200,000(1+0.19)2PV = \frac{-200,000}{(1 +
0.19)^2}PV=(1+0.19)2−200,000 PV=−200,0001.192PV = \
frac{-200,000}{1.19^2}PV=1.192−200,000
PV=−200,0001.4161PV = \frac{-200,000}
{1.4161}PV=1.4161−200,000 PV≈−R140,919.09PV \approx -
R140,919.09PV≈−R140,919.09
, 2. For Time = 3 years, Cash Flow = -R500,000
PV=−500,000(1+0.19)3PV = \frac{-500,000}{(1 +
0.19)^3}PV=(1+0.19)3−500,000 PV=−500,0001.193PV = \
frac{-500,000}{1.19^3}PV=1.193−500,000
PV=−500,0001.6849PV = \frac{-500,000}
{1.6849}PV=1.6849−500,000 PV≈−R296,673.14PV \approx -
R296,673.14PV≈−R296,673.14
3. For Time = 7 years, Cash Flow = R700,000
PV=700,000(1+0.19)7PV = \frac{700,000}{(1 +
0.19)^7}PV=(1+0.19)7700,000 PV=700,0001.197PV = \
frac{700,000}{1.19^7}PV=1.197700,000
PV=700,0003.4141PV = \frac{700,000}
{3.4141}PV=3.4141700,000 PV≈204,644.73PV \approx
204,644.73PV≈204,644.73
4. For Time = 8 years, Cash Flow = R850,000
PV=850,000(1+0.19)8PV = \frac{850,000}{(1 +
0.19)^8}PV=(1+0.19)8850,000 PV=850,0001.198PV = \
frac{850,000}{1.19^8}PV=1.198850,000
PV=850,0004.0595PV = \frac{850,000}
{4.0595}PV=4.0595850,000 PV≈209,069.36PV \approx
209,069.36PV≈209,069.36
5. For Time = 9 years, Cash Flow = -R210,000
PV=−210,000(1+0.19)9PV = \frac{-210,000}{(1 +
0.19)^9}PV=(1+0.19)9−210,000 PV=−210,0001.199PV = \
frac{-210,000}{1.19^9}PV=1.199−210,000
PV=−210,0004.8269PV = \frac{-210,000}
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