Question

1. A construction company desires to accumulate GH¢25,000 over a ten-year period to enable it to replace its ageing excavator. For an interest rate of 10% per annum compounded semi- annually, what is the required semi-annual payment?

2. A small construction company is considering the purchase of a used bulldozer for GH¢61,000. If the company purchases the bulldozer now, the equivalent future amount in year 4 that the company is paying for the dozer at 4% per year interest is?

3. The cost of lighting and maintaining an airport control tower equipment is GH¢90,000 per year. At the interest rate of 10% per year, what is the present worth of maintaining the equipment for 10 years?

4. A construction manager wanted to retire in 20 years with GH¢1.5 million. At 10% per year interest, to reach the GH¢1.5million goal, starting 1 year from now, the engineer must annually invest what amount?

5. The amount of money that Zeta Construction Ltd can spend now improving productivity in lieu of spending GH¢30,000 three years from now at an interest rate of 12% per year is?

6. A project involves the initial capital investment of GH¢100,000. It is expected that following this investment the company will benefit from it by obtaining net cash receipts of GH¢40,000, GH¢40,000, GH¢30,000 and GH¢20,000 in each of the first four years of the project’s life respectively. Assuming that these values are in money terms as opposed to real terms that which take account of the rate of inflation, what is the NPV for the project if the firm’s cost of capital is 12%?

7. What is the future value in exactly 4 years’ time of an investment of GH¢10,000 received today and invested at 4% compound interest?

8. What would be the future value of the above if the compound interest rate were 8%?

9. A 3-year project is being evaluated using a discount rate of 5%. It is expected to have a cash inflow of GH¢60,000 at the end of its first year, GH¢50,000 at the end of its 2nd year and GH¢40,000 at the end of its third year. What is the present value of the future cash flows?

10. The number of years required for an account to accumulate GH¢650,000 if Josiah deposits GH¢50,000 each year and the account earns interest at a rate of 6% per year is what?

11. A large face-shovel is bought new for a price of GH¢23,250. It has an expected life of seven years when it is expected to have no salvage or resale value. Expenditure on maintenance, insurance, taxation, fuel and lubricants is expected to reach GH¢500 by the end of the first year, GH¢700 by the second, GH¢900 by the end of the third and so on increasing by GH¢200 each year. What is the Present value of owning this piece of equipment if interest is at 5%?

12. Owing to a slack in the economy, Omega Construction Limited temporarily folded up for four years. Throughout this period, repair and maintenance work was carried out on their equipment and this cost GH¢15,000 per annum. Calculate the accumulated sum involved at the end of the four-year period, assuming a compound interest rate of 8%

Answer 1