Exampie 12: A company is appraising two projccts A and B. Assuming the present value of future cash flows for project A is 75,000 and that for project B is 74,850. Also assume that both projects have an initial capital investment of 4,750 cach. Calculate the PI for both projects and determine whether or not to invest in the projects.
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- suppose that you have started a manufacturing/Service Organization in Abu Dhabi UAE with a capital of $200,000-$800,000. You are free to assume/invest within the range of $200,000 - $800,000, depending on the size of the business. 1-you need to assume cash flows with assumed discounted rate for five years and calculate the NPV of the project. 2- Find out the BEP (Break Even Point) of your business and take necessary actions on the basis of your results.Your company is competing to sell a life annuity-due with an actuarial present value of 500,000 to a 50-year-old individual. Based on your company’s experience, typical 50- year-old annuitants have a complete life expectancy of 25 years. However, this individual is not as healthy as your company’s typical annuitant, and your medical experts estimate that his complete life expectancy is only 15 years. You decide to price the benefit using the issue age that produces a complete life expectancy of 15 years. You also assume: − For typical annuitants of all ages, mortality follows De Moivre’s Law with the same limiting age, w. − i = 0.06 Calculate the annual benefit that your company can offer to this individual.Assume the spot Swiss franc is $0.7000 and the six-month forward rate is $0.6950. What is the value of a six-month call and a put option with a strike price of $0.6800 should sell for in a rational market? Assume the annualized six-month Eurodollar rate is 3.5 percent. Assume the annualized volatility of the Swiss franc is 14.2 percent. Use the European option-pricing models to value the call and put option. Option Value Call cents Put cents
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