Fundamentals of Financial Management, Third Edition

SOLVED NUMERICAL PROBLEMS

1. A person saves Rs 10,000 every year for 18 years so that he will get a lumpsum amount thereafter to do a business. He expects that his savings should earn 8% interest. Find the size of the lumpsum amount.

   Solution

   Based on Eq. 2.5

   Rs 10,000 × {(1.08¹⁸ − 1)/0.08}

     = Rs 10,000 × 37.4502 = Rs 3,74,502.

    

2. A company has to replace a machine after 21 years for which it deposits Rs 30,000 every year in the beginning of the year. In all, there are 21 installments deposited at the rate of 5% p.a. Find the future value.

   Solution

   Based on Eq. 2.7

   Rs 30,000 × {(1.05²¹ − 1)/0.05} × 1.05

     = Rs 30,000 × (2.7860/0.05) × 1.05

     = Rs 11,25,180.

    

3. A shareholder receives dividend amounting to Rs 5000, Rs 5,200, Rs 5,500 and Rs 5,700 ...