1) Mr Anderson, a pharmacist and the owner of a block of flats located at Twabidi, a first class residential area in Accra anticipates that he will need to provide a new stair case in 8 years’ time at an estimated cost of ¢7,500,000. If capital can be invested at 9.52% per annum, what amount should be invested to meet the future liability? 2) A speculator purchased Barclays Bank Ghana Limited corporate bond for ¢500,000. The bond is expected to yield a coupon payment of ¢50,000 per annum for the next 25 years. At the end of this period, it will be necessary to buy a new bond at cost of ¢700,000 at the same coupon rate so that the speculator can still meet his expenditures. Assuming that the coupon rate is the same as the interest, how should the purchaser provide for this future expenditure and what will be the effect on his percentage yield? 3) An investor bought a plot of land at the cost of ¢1,500,000 in 1998. He immediately executed site works at a cost of ¢450,000. He has now decided to sell the property and considers it to be an 8% venture. Advice on the minimum selling price of the property.

1) Mr Anderson, a pharmacist and the owner of a block of flats located at Twabidi, a first class residential area in Accra anticipates that he will need to provide a new stair case in 8 years’ time at an estimated cost of ¢7,500,000. If capital can be invested at 9.52% per annum, what amount should be invested to meet the future liability? 2) A speculator purchased Barclays Bank Ghana Limited corporate bond for ¢500,000. The bond is expected to yield a coupon payment of ¢50,000 per annum for the next 25 years. At the end of this period, it will be necessary to buy a new bond at cost of ¢700,000 at the same coupon rate so that the speculator can still meet his expenditures. Assuming that the coupon rate is the same as the interest, how should the purchaser provide for this future expenditure and what will be the effect on his percentage yield? 3) An investor bought a plot of land at the cost of ¢1,500,000 in 1998. He immediately executed site works at a cost of ¢450,000. He has now decided to sell the property and considers it to be an 8% venture. Advice on the minimum selling price of the property.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

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