Sugar Land Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by a MBA student. The production line would be set up in unused space (Market Value Zero) in Sugar Land’ main plant. Total cost of the machine is $350,000. The machinery has an economic life of 4 years and will be depreciated using MACRS for 3-year property class. The machine will have a salvage value of $35,000 after 4 years.

The new line will generate Sales of 1,750 units per year for 4 years and the variable cost per unit is $110 in the first year. Each unit can be sold for $210 in the first year. The sales price and variable cost are expected to increase by 3% per year due to inflation. Further, to handle the new line, the firm’s net working capital would have to increase by $30,000 at time zero (No change in NWC in years 1 through 3 and the NWC will be recouped in year 4). The firm’s tax rate is 40% and its weighted average cost of capital is 11%.

Estimate annual (Year 1 through 4) operating cash flows

King Solomon- The Rich Farmer King Solomon is a rich farmer in Tetebia, a town in the Asou Municipal Assembly. He owns over 100,000 hectares of farmlands. However, he fears the worst might happen and wants to do some investments to secure his future and that of his children. He is contemplating several long term investments he could undertake to secure his future and that if his children. He is now 50 years old and he plans to retire in 10 years from active farm work. He expects to live for another 25 years after he retires –that is, until age 85. He heard about an investment in the financial market will help him plan his retirement well. He has no idea about financial markets and how they operate. You recently graduated and have just reported to work as an investment advisor at the brokerage firm of Cenden Ltd. King Solomon has approached your company for advice. Your boss after a discussion with King Solomon could gather the following information. King Solomon wants his first retirement payment to have the same purchasing power at the time he retires as GHȼ 40,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: King Solomon realizes that the real value of his retirement income will decline year by year after he retires.) His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 5% per year from today forward. He currently has GHȼ 100,000 saved up, and he expects to earn a return on his savings of 8% per year with annual compounding. Again, he wants to have a secure university education for his lovely daughter Daisy. His daughter is now 13 years old. She plans to enroll at the University of Professional Studies, Accra in 5 years, and it should take her 4 years to complete her education. Currently, the cost per year (for everything – her food, clothing, tuition, books, transportation, and so forth) is GH¢ 12,000 per year. This cost is expected to remain constant throughout the four-year university education. The daughter recently received GH¢ 7,500 from her grandfather‟s (King David‟s) estate; this money will be invested at a rate of 8% to help meet the costs of Daisy‟s education. The rest of the costs will be met by money King Solomon will deposit in a savings account which also earns 8 percent compound interest per year. He will make 5 equal deposits into the account, one deposit per annum starting one year from now until his daughter starts university. These deposits will begin one year from now. (Assume that school fees are paid at the beginning of the year). Your firm also serves as the investment adviser for Zenzo Pharma Ltd which intends to issue bonds to finance the production of its new vaccine. The bond has a face value of GH¢10,000 at a coupon rate of 12% and a term to maturity of 10 years. The bond expects to pay coupons semi-annually. Your firm however insists on Zenzo Pharma including a call and a sinking fund provision in the bond indenture. The required rate of return on the market for bonds with similar features is 18% per annum. EXAMINER: ISAAC OFOEDA Page 5 Required b. To the nearest cedi, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to meet his retirement goal? (Note: Neither the amount he saves nor the amount he withdraws upon retirement is a growing annuity.) c. What will be the present value of the cost of 4 years of education at the time the daughter Daisy turns 18? d. What will be the value of the GH¢ 7,500 that Daisy received from her grandfather‟s estate when she starts college at age 18? e. If King Solomon is planning to make the first of 5 deposits one year from now, how large must each deposit be for him to able to put his daughter through college? f. Explain to King Solomon what call provisions and sinking fund provisions are and how these provisions are expected to affect the risk of the bond g. Which value will you place on a bond of Zenzo Pharma Ltd?

King Solomon is a rich farmer in Tetebia, a town in the Asou Municipal Assembly. He owns over 100,000 hectares of farmlands. However, he fears the worst might happen and wants to do some investments to secure his future and that of his children. He is contemplating several long term investments he could undertake to secure his future and that if his children. He is now 50 years old and he plans to retire in 10 years from active farm work. He expects to live for another 25 years after he retires –that is, until age 85. He heard about an investment in the financial market will help him plan his retirement well. He has no idea about financial markets and how they operate. You recently graduated and have just reported to work as an investment advisor at the brokerage firm of Cenden Ltd. King Solomon has approached your company for advice. Your boss after a discussion with King Solomon could gather the following information. King Solomon wants his first retirement payment to have the same purchasing power at the time he retires as GHȼ 40,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: King Solomon realizes that the real value of his retirement income will decline year by year after he retires.) His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 5% per year from today forward. He currently has GHȼ 100,000 saved up, and he expects to earn a return on his savings of 8% per year with annual compounding.

Again, he wants to have a secure university education for his lovely daughter Daisy. His daughter is now 13 years old. She plans to enroll at the University of Professional Studies, Accra in 5 years, and it should take her 4 years to complete her education. Currently, the cost per year (for everything – her food, clothing, tuition, books, transportation, and so forth) is GH¢ 12,000 per year. This cost is expected to remain constant throughout the four-year university education.
The daughter recently received GH¢ 7,500 from her grandfather‟s (King David‟s) estate; this money will be invested at a rate of 8% to help meet the costs of Daisy‟s education. The rest of the costs will be met by money King Solomon will deposit in a savings account which also earns 8 percent compound interest per year. He will make 5 equal deposits into the account, one deposit per annum starting one year from now until his daughter starts university. These deposits will begin one year from now. (Assume that school fees are paid at the beginning of the year).

Your firm also serves as the investment adviser for Zenzo Pharma Ltd which intends to issue bonds to finance the production of its new vaccine. The bond has a face value of GH¢10,000 at a coupon rate of 12% and a term to maturity of 10 years. The bond expects to pay coupons semiannually. Your firm however insists on Zenzo Pharma including a call and a sinking fund provision in the bond indenture. The required rate of return on the market for bonds with similar features is 18% per annum.

Required
a)Explain to King Solomon what financial markets mean and which three (3) financial
instruments he can invest in.                                                                                      

b)To the nearest cedi, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to meet his retirement goal? (Note: Neither the amount he saves nor the amount he withdraws upon
retirement is a growing annuity.)                                                                               

c)What will be the present value of the cost of 4 years of education at the time the daughter
Daisy turns 18?                                                                                                                        

d)What will be the value of the GH¢ 7,500 that Daisy received from her grandfather‟s estate
when she starts college at age 18?                                                                              

e)If King Solomon is planning to make the first of 5 deposits one year from now, how large must each deposit be for him to able to put his daughter through college?               

f)Explain to King Solomon what call provisions and sinking fund provisions are and how these provisions are expected to affect the risk of the bond                                     

g)Which value will you place on a bond of Zenzo Pharma Ltd?                                  

King Solomon is a rich farmer in Tetebia, a town in the Asou Municipal Assembly. He owns over 100,000 hectares of farmlands. However, he fears the worst might happen and wants to do some investments to secure his future and that of his children. He is contemplating some long term investments he could undertake to secure his future and that if his children. He is now 50 years old and he plans to retire in 10 years from active farm work. He expects to live for another 25 years after he retires –that is, until age 85. He was advised by a friend that an investment in the financial market will help him plan his retirement well. He has no idea about financial markets and how they operate. You recently graduated and have just reported to work as an investment advisor at the brokerage firm of Cenden Ltd. King Solomon has approached your company for advice. Your boss after a discussion with King Solomon could gather the following information. King Solomon wants his first retirement payment to have the same purchasing power at the time he retires as GHȼ 40,000 has today. He wants all of his subsequent retirement payments to be equal to his first retirement payment. (Do not let the retirement payments grow with inflation: King Solomon realizes that the real value of his retirement income will decline year by year after he retires.) His retirement income will begin the day he retires, 10 years from today, and he will then receive 24 additional annual payments. Inflation is expected to be 5% per year from today forward. He currently has GHȼ 100,000 saved up, and he expects to earn a return on his savings of 8% per year with annual compounding.

Again, he wants to have a secure university education for his lovely daughter Daisy. His daughter is now 13 years old. She plans to enroll at the University of Professional Studies, Accra in 5 years, and it should take her 4 years to complete her education. Currently, the cost per year (for everything – her food, clothing, tuition, books, transportation, and so forth) is GH¢ 12,000 per year. This cost is expected to remain constant throughout the four-year university education. The daughter recently received GH¢ 7,500 from her grandfather’s (King David’s) estate; this money will be invested at a rate of 8% to help meet the costs of Daisy’s education. The rest of the costs will be met by money King Solomon will deposit in a savings account which also earns 8 percent compound interest per year. He will make 5 equal deposits into the account, one deposit per annum starting one year from now until his daughter starts university. These deposits will begin one year from now. (Assume that school fees are paid at the beginning of the year).

Again, King Solomon is interested in buying a bond issued by Zenzo Pharma Ltd. Zenzo Pharma intends to use the proceeds of the bonds to finance the production of its new vaccine for COVID 19. The bond has a face value of GH¢10,000 at a coupon rate of 12% and a term to maturity of 10 years. The bond expects to pay coupons annually. Included in the bond indenture are call and sinking fund provisions. The required rate of return on the market for bonds with similar features is 18% per annum. Your boss had asked you to advice King Solomon based on the information he provided

Required
a. Explain to King Solomon what financial markets mean and which three (3) financial instruments he can invest in.                                                                                   
b. To the nearest cedi, how much must he save during each of the next 10 years (with equal deposits being made at the end of each year, beginning a year from today) to meet his retirement goal? (Note: Neither the amount he saves nor the amount he withdraws upon
retirement is a growing annuity.)                                                                           
c. What will be the present value of the cost of 4 years of education at the time the daughter
Daisy turns 18?                                                                                                                      
d. What will be the value of the GH¢ 7,500 that Daisy received from her grandfather’s estate
when she starts college at 18?                                                                                   
e. If King Solomon is planning to make the first of 5 deposits one year from now, how large must each deposit be for him to able to put his daughter through college?            
f. Explain to King Solomon what call provisions and sinking fund provisions are and how these provisions are expected to affect the risk of the bond                                 
g. Which value will you place on a bond of Zenzo Pharma Ltd?                              

13) Trident — the same U.S.-based company discussed in this chapter, has concluded a second larger sale of telecommunications equipment to Regency (U.K.). Total payment of £2,000,000 is due in 90 days. Given the following exchange rates and interest rates, which of the following statements about option hedge is correct?

Select one:

a.Buy put options of £2,000,000 with strike of $1.54/£ and receive a (net) minimum of $3,052,116.33 at end of 90 days.

b.Sell put options of £2,000,000 with strike of $1.54/£ and receive a (net) minimum of $3,048,077.55 at end of 90 days.

c.Sell put options of £2,000,000 with strike of $1.55/£ and receive a (net) minimum of $3,052,116.33 at end of 90 days.

d.Buy put options of £2,000,000 with strike of $1.55/£ and receive a (net) minimum of $3,048,077.55 at end of 90 days.

e.Buy put options of £2,000,000 with strike of $1.55/£ and receive a (net) minimum of $3,052,116.33 at end of 90 days.

Trident — the same U.S.-based company discussed in this chapter, has concluded a second larger sale of telecommunications equipment to Regency (U.K.). Total payment of £2,000,000 is due in 90 days. Given the following exchange rates and interest rates, which of the following statements about option hedge is correct?

Select one:

Sell put options of £2,000,000 with strike of $1.55/£ and receive a (net) minimum of $3,052,116.33 at end of 90 days.

Buy put options of £2,000,000 with strike of $1.55/£ and receive a (net) minimum of $3,048,077.55 at end of 90 days.

Buy put options of £2,000,000 with strike of $1.55/£ and receive a (net) minimum of $3,052,116.33 at end of 90 days.

Buy put options of £2,000,000 with strike of $1.54/£ and receive a (net) minimum of $3,052,116.33 at end of 90 days.

Sell put options of £2,000,000 with strike of $1.54/£ and receive a (net) minimum of $3,048,077.55 at end of 90 days.

"For the Kingdom of Heaven is like the landowner who went out early one morning to hire workers for his vineyard. 2 He agreed to pay the normal daily wage and sent them out to work. 3 "At nine o'clock in the morning he was passing through the marketplace and saw some people standing around doing nothing. 4 So he hired them, telling them he would pay them whatever was right at the end of the day. 5 So they went to work in the vineyard. At noon and again at three o'clock he did the same thing.

6 "At five o'clock that afternoon he was in town again and saw some more people standing around. He asked them, 'Why haven't you been working today?' 7 "They replied, 'Because no one hired us.' "The landowner told them, 'Then go out and join the others in my vineyard.' 8 "That evening he told the foreman to call the workers in and pay them, beginning with the last workers first. 9 When those hired at five o'clock were paid, each received a full day's wage. 10 When those hired first came to get their pay, they assumed they would receive more. But they, too, were paid a day's wage. 11 When they received their pay, they protested to the owner, 12 'Those people worked only one hour, and yet you've paid them just as much as you paid us who worked all day in the scorching heat.'

13 "He answered one of them, 'Friend, I haven't been unfair! Didn't you agree to work all day for the usual wage? 14 Take your money and go. I wanted to pay this last worker the same as you. 15 Is it against the law for me to do what I want with my money? Should you be jealous because I am kind to others?' 16 "So those who are last now will be first then, and those who are first will be last."

1. Have you ever heard or used the phrase "sometimes life isn't fair". If there was ever a time to use it in the Bible, it would be this passage. This week you will learn about payroll. Every organization has clear policies and procedures about banking and payroll. However, sometimes policies and procedures can conflict with Kingdom living. Can you think of an example of this? Has God ever prompted your heart to give to someone more than was required?
2. Have you heard this saying, "Do for one what you wish you could do for everyone"? What does it mean to you?

Question 20

1. Like many high school seniors, Anne has several universities to consider when making her final college choice. To assist in her decision, she has decided to use AHP to develop a ranking for school R, school P, and school M. The schools will be evaluated on five criteria, and Anne's pair-wise comparison matrix for the criteria is shown below.
   

The universities' pair-wise comparisons on the criteria are shown below

1. Distance	R	P	M
   R	1	2	3
   P	1/2	1	3/2
   M	1/3	2/3	1

   Programs	R	P	M
   R	1	1/2	1
   P	2	1	2
   M	1	1/2	1

   Size	R	P	M
   R	1	4	2
   P	1/4	1	1/2
   M	1/2	2	1

   Climate	R	P	M
   R	1	1	3
   P	1	1	3
   M	1/3	1/3	1

   Cost	R	P	M
   R	1	1/5	1
   P	5	1	5
   M	1	1/5	1

   
   What is the overall priority of the three universities?

   University Priority R 0.5714 P 0.1429 M 0.2857
   		University Priority R 0.2500 P 0.5000 M 0.2500
   		University Priority R 0.3705 P 0.4030 M 0.2265
   		University Priority R 0.5455 P 0.2727 M 0.1818
   		University Priority R 0.4286 P 0.4286 M 0.1428

Euromarket investment and fund raising   A​ U.S.-based multinational company has two​ subsidiaries, one in Mexico​ (local currency, Mexican​ peso, MP) and one in Japan​ (local currency,​ yen, ¥). Forecasts of business operations indicate the following​ short-term financing position for each subsidiary​ (in equivalent U.S.​ dollars):

​Mexico: $85 million excess cash to be invested​ (lent)

​Japan: $70 million funds to be raised​ (borrowed)

The management gathered the following​ data:

a) Determine the effective interest rates for all three currencies in both the Euromarket and the domestic​ market;

b) Then indicate where the funds should be invested and raised.  

​(​Note: Assume that because of local​ regulations, a subsidiary is not permitted to use the domestic market of any other​ subsidiary.)