You are considering to purchase an apartment in your city costing Tk. 50,00,000. You have three offers:
(i) Pay full in cash.
(ii) Pay 25% of the cost in cash immediately and pay Tk. 6,60,000 each year for the next 10 years.
(iii) Pay 50% of the cost in cash and take a loan of Tk. 25,00,000 from BHBFC at 15% interest to be paid in equal monthly installment over the next 20 years.
Assume 12% opportunity cost, which offer you should accept?
ACI Ltd. requires working capital of Tk. 10,00,000. There are two alternatives:
(i) Bank loan Mutual Trust Bank is interested to grant Tk. 10,00,000 as a loan @ 12% per annum for 6 month after reduction of 5% as compensating balance.
(ii) Commercial paper: To issue commercial paper at 12%. The cost of issuing would be Tk. 20,000 in each quarter.
Requirements:
(a) Calculate the effective interest rate of first alternative.
(b) Which alternative should the company and why?
Each of the two mutually exclusive projects involves an investment of Tk. 1,25,000. Cashflows of the two projects are expected as follows:
Project M
Tk.
Project N
(i) Compute IRR (internal rate of return) for each project.
(ii) Which project would you select, assuming no capital rationing?
You have been asked for your advice in selecting a portfolio of assets. You have been given the following data:
Expected returns
You are required to calculate portfolio return for a portfolio consisting of asset A and B by investing equal proportions in each of the two assets.