###### Question: QUESTION 1 (15 Marks) (a) Describe A Scenario In The Field Of Finance Which Could Be Modeled As A Binomial Distribution (Word Count Around 150 Words) (b) Seed Crops Such As Wheat, Maize, Pumpkin Are Sensitive To Moisture And Thus The Amount Of Rainfall. Rainfall Leves Can Be Qualified As : Light, Moderate, Heavy And Violent. A Seed Crop Farmer Recorded …
September 2, 2020
###### Question: New Plc Is Considering Whether To Replace Existing Machineries. This Will Require An Initial Investment Of £1.2million. New Machineries Would Have An Expected Life Of Six Years. At The End Of Six Years, They Could Be Sold For £150,000. Replacement Of Machineries Is Expected To Generate Additional Annual Revenues Of £400,000. The Incremental Costs …
September 2, 2020
Cash flows of two mutually exclusive projects are as follows. Project A costs \$80,000 initially and will have a \$15,000 salvage value after 3 years. The operating cost with this method will be \$30,000 per year. Project B has initial cost of \$120.000, an operating cost of \$8,000 per year, and a \$40,000 salvage value after its 3-year life. Assume the interest rate is 12% per year. Which of the following statements is true? The present worth of project B is -\$110.743.44. The present worth of project A is -\$141,252.17. Project A should be selected. Two projects have different life cycle. G13 =NPV(B13,67:910)+G6 A B C D E H 1 Life Cycle Analysis: PW 2 3 4 5 Project A \$80,000 Project B \$120,000 6 Initial Cost 7 Project A Project B (\$80,000) (\$120,000) (\$30,000) (\$8,000) (\$30,000) (\$8,000) (\$30,000) (\$8,000) \$15,000 \$40,000 8 Salvage Value \$15,000 \$40,000 9 10 Operating cost \$30,000 \$8,000 11 12 Int Rate 13 0.12 (\$142,522.17) (\$113,793.93) 14 15 Life Time (Years) 16 3 17