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QUESTION 2 An amount of money received today is worth more than the same value received a year from now. With this scenario, a lot of people choose to get the money now. Required: (a) Give three reasons why people prefer to get the money immediately than to relinquish it for future. (6 marks) (b) Lasisi would like to buy a royal motorbike for okada business, and it is currently on the market at 11,400, but he cannot afford it right now. However, he thinks that he would be able to buy it after 4 years. If the expected inflation rate as applied to the price of this motorbike is 3.9% per year, what is its expected price after four years? (4 marks) (c) Alata Kwaku borrowed $2,130 from his uncle and promised to pay him 2,720 after 2 years. With annual compounding, find the implied annual rate of interest for this loan. (4 marks) (d) Oberima Adonteng's bank account pays 8.8% annual interest, compounded monthly. If the present value is 2. its future value is 44. How long will it take the money to double in the account? (6 marks) QUESTIONS INCOME STATEMENT FOR ASAAWA CO. LTD. 1995 1996 1997 1998 Revenue 4.050,000 3.390.000 4.013,000 4.171.000 Cost of goods sold 1.480.000 2.625.000 2.110.000 2.095.500 Gross profit 2.570,000 1.365.000 1.903.000 2,075,500 Administrative overhead Consulting expenses 485.000 438.000 465.300 492.000 Telephone 237.000 134,000 148.200 134,000 Insurance 148,300 107.000 109,000 113,300 Travel costs 207,100 123,000 127.900 125,000 Legal staff wages 333.400 141.000 136,700 144,200 Permits and licenses 93.000 98,000 99 500 97,000 Total Administrative Expenses Earnings Before Interest, Tas and Depreciation Interest Taxes Depreciation Net profit 1,563,800 1,066,200 58,300 200.800 87,200 719,900 1.041,000 1,086,600 1,105,500 324,000 816,400 970,000 29,000 33,100 34,200 134,000 129.800 139,000 33.000 58,700 68,800 108,000 594,800 728,000 Required: Calculate and comment on the following: (a) Net profit margin for 1995 (3 marks) (b) Gross profit margin 1996 (3 marks) (c) Net profit margin for 1997 (3 marks) (d) Gross profit margin for 1998 (3 marks (e) What is your opinion for investors who have expressed interest to capitalize the firm? (3 marks) (If the money owned to suppliers by Asawa Co. Ltd in 1995 happened to be c3,170, whereas purchases done on credit amounted to 428,950. Determine the organization's Average Payment Period (5 marks) (Total: 20 marks)

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