Question 3.Match the following terms with the appropriate definition.Future ValueTime value of moneyMonetary AssetPresent value of a single amountSimple interestA.Claim to a fixed amount of cash.B.A dollar now is worth more than a dollar later.C.Based on initial investment only.D.Amount today equivalent to a specified future amount.E.Accumulation of an amount with interest.

In terms of future value (FV) which of the following considerations is correct? Select one: O A. Consider only future cash flows as relevant factors O B. Consider only past cash flows as relevant factors O C. Consider past sales revenues and cost of sales as relevant factors O D. Consider future gross profit and net profits as relevant factors

[S1] Assuming total cashflows are equal for both assets, the asset with more cashflows in the latter years will be valued lower. [S2] As the discount rate increases, the value of the asset increases.  a.Only S1 is true. b.Only S2 is true. c.Both S1 and S2 are true. d.Both S1 and S2 are false.

Distinguish between annual income in the presence of depreciation and annual operating cash flow?

2) Which of the following statements is INCORRECT based on the time value of money? A) In general, money today is worth more than money in one year. B) We define the risk-free interest rate (rf) for a given period as the interest rate at which money can be borrowed or lent without risk over that period. C) We refer to (1-r) as the interest rate factor for risk-free cash flows. D) For most financial decisions, costs and benefits occur at different points in time.

Consider two assets with the following cash flow streams:   Asset A generates $4 at t=1, $3 at t=2, and $10 at t=3. Asset B generates $2 at t=1, $X at t=2, and $10 at t=3.   Suppose X=6 and the interest rate r is constant.   For r=0.1, calculate the present value of the two assets. Determine the set of all interest rates {r} such that asset A is more valuable than asset Draw the present value of the assets as a function of the interest rate. Suppose r=0.2. Find the value X such that the present value of asset B is 12. Suppose the (one-period) interest rates are variable and given as follows: r01=0.1,r12=0.2, r23=0.3. Calculate the yield to maturity of asset A. (You can use Excel or ascientific calculator to find the solution numerically.)

The following information relates to four assets: Probability Return on E Return on F Return on G Return on H 0.1 10% 6% 14% 2% 0.2 10% 8% 12% 6% 0.4 10% 10% 10% 9% 0.2 10% 12% 8% 15% 0.1 10% 14% 6% 20% (a) What is the expected return for each of the assets? (4) (b) Calculate the variance of each asset. (8) (c) Determine the covariance of asset F and G. (4) (d) What is the correlation coefficient between assets F and G? (4)

How is valuation of any financial asset related to future cash flows?

b. Disregard the assumptions in Part a. What is the depreciable basis? What are the annual depreciation expenses? c. Calculate the annual sales revenues and costs (other than depreciation). Why is it important to include inflation when estimating cash flows? d. Calculate annual net operating profit after sales (NOPAT). Then calculate the operating cash flows.

REQUIRED Study the information given below and answer the following questions: 1. Calculate the Payback Period (expressed in years, months and days).    2. Calculate the Accounting Rate of Return on average investment (expressed to two decimal places).  3. Identify TWO (2) reasons why Umdloti Limited should not use the accounting rate of return to evaluate capital investments. 4. Calculate the Net Present Value.  5. Calculate the Internal Rate of Return (expressed to two decimal places) if the net cash flows are R320 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.