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Assignment - 1 - Time Value of Money

The document contains an assignment with 4 questions related to business finance. Question 1 asks to draw a cash flow timeline and calculate the present value of a coal mine project with varying profits over 25 years. Question 2 asks to calculate the monthly payment on a 15 year, 12% interest loan of Rs. 15,000,000. Question 3 asks to calculate the annual payments on a 10 year, 10% mortgage of $120,000 with a 25% down payment. Question 4 asks to calculate deposit amounts needed at retirement to receive Rs. 100,000 monthly for 15 years at 15% interest and 11% interest compounded semi-annually.

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Saith Umair
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66 views2 pages

Assignment - 1 - Time Value of Money

The document contains an assignment with 4 questions related to business finance. Question 1 asks to draw a cash flow timeline and calculate the present value of a coal mine project with varying profits over 25 years. Question 2 asks to calculate the monthly payment on a 15 year, 12% interest loan of Rs. 15,000,000. Question 3 asks to calculate the annual payments on a 10 year, 10% mortgage of $120,000 with a 25% down payment. Question 4 asks to calculate deposit amounts needed at retirement to receive Rs. 100,000 monthly for 15 years at 15% interest and 11% interest compounded semi-annually.

Uploaded by

Saith Umair
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1

The University Of Central Punjab

Name: Muhammad Umair

Reg. NO. L1F21BBAM0359

Instructor Saleem Anjum

Section (K)

Allocate Date 19-04-2023

Sub. Date 27-04-2023

Assignment (01)

(Assignment No 1) (UCP Business School) (Business Finance)


1

Q-1 A firm wants to open a new coal mine. The price of coal is very volatile and the projected
profits over the next five years are: Rs. 100,000, Rs. 230,000, Rs. 150,000, Rs. 180,000 and Rs.
120,000 respectively. After that profits will be a constant Rs. 150,000 per year for next 20 years
at which time the mine closes.

Required:

a) Draw a timeline and show the cash flows on the timeline.


b) If 14% is the appropriate discount rate for the first five years and is 12% after that, what
is the present value of the mine?

Q-2 If you borrow Rs. 15,000,000 for a house at 12% compound annual interest rate for 15
years, and agree to pay off the loan in monthly installments over the next fifteen years, what is
your monthly payment?

Q-3 Waleed just purchased a new house for $120,000. He was able to make a down payment
equal to 25% of the value of the house; the balance was mortgaged. The rate by the bank is 10%
compounded annually. The mortgage has a 10 year amortization period (this means that
payments are calculated assuming it will take 10 years to pay off the loan).

a) What will be the size of the 10 equal annual payments?

Q-4 How much a person needs to deposit at the age of retirement to receive Rs. 100,000 each
month for next 15 years? Assume the interest rate of 15%. What if the interest rate is 11% but
compounded semi-annually?

NOTE:

Show complete calculations, late submissions will not be accepted and copied assignments will
not be marked/graded.

(Assignment No 1) (UCP Business School) (Business Finance)

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