A construction company plans to purchase a construction machine. There are two alternatives: - Alternative 1: making a one-shot payment of VND 550 million. - Alternative 2: making instalments: + The first instalment of VND 200 million is paid at the time of delivering the machine. + After 3 months, the next instalments of VND 75 million are made regularly for 5 months (pay at the beginning of a month). Given an effective interest rate is 1% per month.
Exercises of Investment Economics Ex 1: A man lent VND 300 million for years at an annual interest rate of 10% How much can he take back (principal and interest) after the period? How much of interest only? Ex 2: A woman wants an amount of VND 518 million after 12 years at an annual interest rate of 7% How much should she send to a bank account at present? Ex 3: A man sends regularly (at the end of year) an amount of VND 20 million for a 5-year period at an annual interest rate of 8% How much can he withdraw from the account at the end of year 5? How much of interest only? Ex 4: A girl plans to save VND 500 million for years How much could she send regularly to a bank account at the end of each quarter at an interest rate of 2% per quarter? Ex 5: A boy paid a laptop by instalments of VND million for months at a monthly interest rate of 1% If he agreed to pay as a one-shot payment, how much should the amount be? Ex 6: A man won a lottery of VND 300 million and planned to send the amount of money to a 3-month maturity term saving account at an interest rate of 0.8% per month How much is the balance amount for a 2-year period? How much for the interest only? Ex 7: A woman plans to buy a car for USD 30,000, but she only has cash of USD 10,000 The remaining she suggests paying in installments for 10 months The car dealer proposes an interest rate of 1% per month How much must she pay monthly? Ex 8: A construction company plans to purchase a construction machine There are two alternatives: - Alternative 1: making a one-shot payment of VND 550 million - Alternative 2: making instalments: + The first instalment of VND 200 million is paid at the time of delivering the machine + After months, the next instalments of VND 75 million are made regularly for months (pay at the beginning of a month) Given an effective interest rate is 1% per month Question: Select the best alternative? Ex 9: A project needs a loan of VND 8,000 million, in which: the first loan of VND 5,000 million at the beginning of the first year, and the second loan of VND 3,000 million at the beginning of the third year The project will be put into operation at the end of year As a loan contract requirement, the project has to pay back from year to year 10 (6 uniform payment series) The interest rate is 10% per year Question: How much should the accumulated debt at the time of payback commencement (at the beginning of year 5)? - Please make a repayment plan as uniform payment series - Please make a repayment plan as constant principal payments Ex 10: A man agrees to buy a house with the following payment conditions: - At the beginning of the first year (time of delivery), the first payment is VND 1000 million - Regularly pay VND 200 million (at the end of each year) for 10 years - At the end of year 5, the additional payment is VND 500 million Given an annual interest rate of 10% Question: How much is the equivalent price of the house if he agrees to pay as a one-shot payment? Ex 11: A man wants to borrow money as the following plan: the first loan of VND 40 million at time 0; after years, the second loan of VND 80 million; after years, the third loan of VND 150 million An interest rate of 12% per year, compounded semi-annually (6-month period) How much should he repay after 10 years? How much for interest only? Ex 12: Select the best alternative of purchasing machine by using the cost per product unit criterion: No Parameters Purchase price (VND thousand) Useful life (year) Capacity of production (product) Interest rate (%) Annual fixed cost (VND thousand) (excluding depreciation and interest payment) Annual variable cost (VND thousand) Alternative A Alternative B 240 000,0 280 000,0 10 10 14 000 17 000 6 800,0 750,0 112 280,0 121 100,0 Ex 13: As same as Exercise 12, select the best alternative by using the profit per product unit criterion Given the revenue of alternative A and B are VND 224 million and VND 234 million, respectively Ex 14: A company considers an investment project with the following data: No Parameters Unit Amount Investment cost (excluding VAT) VND million 250 000,0 Annual operation cost (including depreciation) VND million 90 000,0 Useful life year 20 Salvage value VND million 200,0 Corporate income tax rate % 20 Annual revenue VND million 125 000,0 Annual interest rate of 10% Given depreciation follows the straight-line method Question: Please analyse the financial viability Ex 15: A company considers an investment project with the following data: No Parameters Unit Amount Investment cost (excluding VAT) VND million 350 000,0 Annual operation cost (excluding depreciation) VND million 70 000,0 Useful life year 20 Salvage value VND million 000,0 Corporate income tax rate % 25 Annual revenue VND million 130 000,0 Annual interest rate of 10% Given depreciation follows the straight-line method Question: Please analyse financial viability Ex 16: Select the best alternative of investment as the following data: No Parameters Unit Alternative Alternative Investment cost (excluding VAT) VND million 700 000,0 500 000,0 Annual operation cost (including depreciation) VND million 174 800,0 180 000,0 Useful life year 20 20 Salvage value VND million 000,0 400,0 Corporate income tax rate % 25 25 Annual revenue VND million 260 000,0 250 000,0 Annual interest rate of 10% Given depreciation follows the straight-line method Ex 17: Select the best alternative of investment by using NPV, NFV, NAV, IRR, and BCR: No Parameters Unit Alternative Alternative Investment cost VND million 400 600 Annual operation cost (excluding depreciation) VND million 88 172 Annual revenue VND million 200 280 Salvage value VND million 80 Insignificant Corporate income tax rate % 20 20 Useful life Year 10 Minimum attractive interest rate % 8 Given depreciation follows the straight-line method Ex 18: There are two alternatives of excavating foundation as follows: - Alternative 1: buying a machine – Alternative 2: renting a machine No Parameters Alternative Alternative Q m3 Q m3 Quantity of excavation Investment cost (allocated by corresponding quantity) VND 125 million Monthly operation cost (excluding depreciation) VND 35 million Construction period months months Renting cost: - At the end of the first month VND 70 million - At the end of the third month VND 178 million VND 350 million VND 350 million Revenue (received at the end of the third month) Given: The above values exclude VAT The interest rate is 1.5% per month Question: a) Select the best alternative? b) If ignoring the time value of money (i = 0%), how much should the profit of each alternative be? Ex 19: A project has the following data: - Investment cost is VND 1000 million Useful life is 10 years Annual profit is VND 100 million Interest rate is 10% per year Salvage value is ignored Please determine the payback period of the project by using a static and dynamic calculation Given the source of payback includes profit and depreciation Ex 20: A project has an annual production capacity of 3000 products, annual revenue of VND 9,000 million, annual fixed cost of VND 640 million, and annual variable cost of VND 7,800 million Please calculate: - Break-even volume Break-even revenue Break-even ratio Please also draw the break-even graph Ex 21: A project produces two kinds of products, A and B: 1) Fixed cost is VND 400 million 2) Variable cost: + With product A: VND 2,6 million/unit + With product B: VND 2,7 million/unit 3) Unit price: + With product A: VND 3,0 million/unit + With product B: VND 3,5 million/unit 4) Quantity of product: + With product A: 1000 units + With product B: 2000 units Question: Please calculate the break-even revenue of the project? Ex 22: A project produces two kinds of products, A and B: - Fixed cost is VND 1000 million - Variable cost: + With product A: VND 0,26 million/unit + With product B: VND 0,32 million/unit - Unit price: + With product A: VND 0,3 million + With product B: VND 0,4 million - Proportion of revenue of products A and B over total revenue: + With product A: 15% + With product B: 85% Question: Please calculate the break-even revenue of the project? Ex 23 A company borrows VND 6,500 million to invest in a project with 10-year useful life Debt repayment period is agreed as years Depreciation is straight-line for the whole useful life with a salvage value of VND 500 million Profit in the first year is expected as VND 350 million, which increases by 10% each year If using profit and depreciation as the source of debt repayment, please analyse the repayment capacity ... project needs a loan of VND 8,000 million, in which: the first loan of VND 5,000 million at the beginning of the first year, and the second loan of VND 3,000 million at the beginning of the third year... value of money (i = 0%), how much should the profit of each alternative be? Ex 19: A project has the following data: - Investment cost is VND 1000 million Useful life is 10 years Annual profit... rate of 10% Given depreciation follows the straight-line method Ex 17: Select the best alternative of investment by using NPV, NFV, NAV, IRR, and BCR: No Parameters Unit Alternative Alternative Investment