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2. (a) Your company is required to pay into a sinking fund each year in matures in 10 years. The amount of the obligation is Tshs 100,000 deposits. How much must your company deposit each year in orde (b)Your uncle lends you Tshs 10,000/- today with the promise that three years. What rate of interest is he charging? (a)What kind of cash flows do investors expect from their investme (b)What role does bond indenture plays in a bond investment? (c)Assume that a company listed on the Sunrise Stock Exchange 100 shillings per share next year, shillings 200 in the year that follo year. After that, dividends are expected to grow at constant 5% pe 10%, what price should investors pay for such shares today? Suppose a firm is considering a project that would require an initia expected to generate shs 4.5 million each year for the next 4 year and costs increases at the same rate and that the required rate of 14%. The firm also practices a policy whereby cash flows are stat inflation rate is expected to be 5%. (a)Outline two ways in which the effects that inflation has on the

2. (a) Your company is required to pay into a sinking fund each year in matures in 10 years. The amount of the obligation is Tshs 100,000 deposits. How much must your company deposit each year in orde (b)Your uncle lends you Tshs 10,000/- today with the promise that three years. What rate of interest is he charging? (a)What kind of cash flows do investors expect from their investme (b)What role does bond indenture plays in a bond investment? (c)Assume that a company listed on the Sunrise Stock Exchange 100 shillings per share next year, shillings 200 in the year that follo year. After that, dividends are expected to grow at constant 5% pe 10%, what price should investors pay for such shares today? Suppose a firm is considering a project that would require an initia expected to generate shs 4.5 million each year for the next 4 year and costs increases at the same rate and that the required rate of 14%. The firm also practices a policy whereby cash flows are stat inflation rate is expected to be 5%. (a)Outline two ways in which the effects that inflation has on the

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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1. 2. (a) Your company is required to pay into a sinking fund each year in order to meet an obligation which matures in 10 years. The amount of the obligation is Tshs 100,000,000 and you can earn 4% on your deposits. How much must your company deposit each year in order to meet these needs? (b)Your uncle lends you Tshs 10,000/- today with the promise that you pay him back Tshs 17,280/- in three years. What rate of interest is he charging? 3. (a)What kind of cash flows do investors expect from their investment in government bonds? (b)What role does bond indenture plays in a bond investment? (c)Assume that a company listed on the Sunrise Stock Exchange expects to pay dividends amounting to 100 shillings per share next year, shillings 200 in the year that follows and 250 shillings in the following year. After that, dividends are expected to grow at constant 5% per year. If the required rate of return is 10%, what price should investors pay for such shares today? Suppose a firm is considering a project that would require an initial cash outlay of 15 million shillings an expected to generate shs 4.5 million each year for the next 4 years. The firm assumes that the prices and costs increases at the same rate and that the required rate of return expressed in nominal terms is 14%. The firm also practices a policy whereby cash flows are stated at the prices of period zero. The inflation rate is expected to be 5%. (a)Outline two ways in which the effects that inflation has on the acceptability of investment projects
Transcribed Image Text:1. 2. (a) Your company is required to pay into a sinking fund each year in order to meet an obligation which matures in 10 years. The amount of the obligation is Tshs 100,000,000 and you can earn 4% on your deposits. How much must your company deposit each year in order to meet these needs? (b)Your uncle lends you Tshs 10,000/- today with the promise that you pay him back Tshs 17,280/- in three years. What rate of interest is he charging? 3. (a)What kind of cash flows do investors expect from their investment in government bonds? (b)What role does bond indenture plays in a bond investment? (c)Assume that a company listed on the Sunrise Stock Exchange expects to pay dividends amounting to 100 shillings per share next year, shillings 200 in the year that follows and 250 shillings in the following year. After that, dividends are expected to grow at constant 5% per year. If the required rate of return is 10%, what price should investors pay for such shares today? Suppose a firm is considering a project that would require an initial cash outlay of 15 million shillings an expected to generate shs 4.5 million each year for the next 4 years. The firm assumes that the prices and costs increases at the same rate and that the required rate of return expressed in nominal terms is 14%. The firm also practices a policy whereby cash flows are stated at the prices of period zero. The inflation rate is expected to be 5%. (a)Outline two ways in which the effects that inflation has on the acceptability of investment projects
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