Description

Instructions

• You have to answer all questions by yourself. Don’t share your work with others.

• You are reminded of the necessity for clear and orderly presentation in your answers. Please show all steps of your workings and computations clearly. Otherwise marks will be deducted. Your assignment will also be assessed based on the qualities of structured organization, grammatical expression, and logic flow.

1. Ch5 (NPV and Other Investment Rules) During class, we learn four investment rules including payback period, internal rate of return, profitability index, and net present value. (15 marks)

a. State the criterion for accepting or rejecting independent projects under each rule. Briefly discuss the potential shortcomings of each rule.

b. What are some of the difficulties that might come up in actual applications of the various investment rules? Elaborate.

c. Which one would be the best investment rule to implement in actual applications? Explain.

2. Ch4 (Basics of Time value of Money Concept) There are two competitors in the local banking zone. Bank ABC provides 11.2% compounded monthly on its time deposit. Bank XYZ provides 11.4% compounded semiannually on its time deposit. If you want to make deposit, which bank should you choose? Explain logically with the calculation. (10 marks)

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