UNIVERSITY OF NAIROBI
SCHOOL OF BUSINESS
PROGRAMME: MSC IN FINANCE
COURSE: CORPORATE FINANCIAL STRATEGY
COURSE CODE: DFI 512
SUBMITED BY:
Abdimalik Mohamed Hussein
D63/39017/2020
(
Question A)
So future value will be (FV=PV (1+i) n)
PV= 78,000
seven years
Rates: 1= 12%
7=20%
2 =14% 3= 0% 4=-5% 5=8% 6= 18%
FV=78,000(1.12)(1.14)(1.0)(10.05)(1.08)(1.18)(1.2)
FV= 78,0000X1.855
FV= 144,686
≡ 843921.20349
(Question B)
PV= 135,000
six years
Rates: 1= 12% 2 =14% 3= 0% 4=-5%
18%
5=8% 6=
FV=135,000 (1.12)(1.14)(1.0)(10.05)(1.08)(1.18)
FV=135,000X1.5458
FV= 208,682.5
c)
Present of cashflows
year
Cashflow
0
1
2
3
4
5
6
7
Rate
0
0
20,000
15000
18000
0
11000
9000
PV formula
Present Values
14 20,000/(1.14)^2
0 15000/(1.0)^3
-5 18000*(1.05)^4
0
18 11000/(1.18)^6
20 9000/(1.2)^7
15,389.40
15000
21879.11
0
4074.75
2511.73
58,854.99
By the end of year two, the present value of these cash flows is 58,854.99
d)
Future of Value of cashflows
year
Cashflow
rate
1
71000
2
-78000
3
50000
4
105000
5
64000
6
0
7
0
12
14
0
-5
8
18
20
FV formula
Future Values
71000*(1.12)^7-1
140,141.41
78000*(1.14)^7-2
-150,000.00
50000*(1.0)^7-3
50000
105000/(1.05)^7-4
90,702.95
64000*(1.08)^7-5
74,649.60
no cf
0.00
no cf
0.00
205,493.96
By the end of year seven, the stream of cash flows will amount to 205,493.96
e)
Year
Cashflow
interest rate
0
105,000
0
1
117000
13
2
94000
12
3
77000
0
4
64000
18
5
49000
12
6
33000
-5
7
84000
-3
8
73000
17
9
52000
13
10
17000
14
At T= zero, the present value of all cash flows is =611,507.96
PV formula
105,000/1
117000/(1.13)^1
94000/(1.12)^2
77000/(1.0)^3
64000/(1.18)^4
49000/(1.12)^5
33000*1.05^6
84000*1.03^7
73000/(1.17)^8
52000/(1.13)^9
17000/(1.14)^10
Present value
105000
103540
74,936
77000
33,010.50
27,803.90
44223.2
103,309.40
20,789.11
17,310.01
4,585.64
611,507.96
For Question F)
At T=5, Future Value of cash flows is,
Cashflows
Discount Rate PV formula
Present Values
117000
13 117000*(1.13)^5-1
190765.4
94000
12 94000/(1.12)^5-2
132,063
77000
0 77000/(1.0)^5-3
77000
64000
18 64000/(1.18)^5-4
75,520.00
49000
12 49000/(1.12)^5-5
49,000.00
524,348.60
Question G)
At T=7, the present value of cash flows for the seven period is
Periods
1
2
3
4
5
6
7
Discount rate
13
12
0
18
12
-5
-3
PV Formula
Prsent Values
117000*(1.13)^7-1
243,588.40
94000*(1.12)^7-2
165,660
77000*(1.0)^7-3
77000
64000*(1.18)^7-4
105,154.00
49000*(1.12)^7-5
61,465.60
33000/1.05^7-6
31428.6
84000*1.03^7-7
84,000.00
768,296.70
Question H)
At T=9, the future Value of cash flows for the nine periods is
1
2
3
4
5
6
7
8
9
Discount rate
13
12
0
18
12
-5
-3
17
13
PV Formula
11700*(1.13)^9-1
94000*(1.12)^9-2
77000*(1.0)^9-3
64000*(1.18)^9-4
49000*(1.12)^9-5
33000/(1.05^9-6
84000/(1.03^9-7
73000*(1.17)^9-8
52000*(1.13)^9-9
Prsent Value
311038
207,804
77000
146,416.00
77,102.40
28506.6
79,178.10
85,410.00
52,000.00
1,064,455.15