Business Mathematics 2 (MGS312)
DIPET 1 in Economics - ECNT
Semester: First Semester
Level: 400
Year: 2017
THE UNIVERSITY OF BAMENDA
HIGHER TECHNICAL TEACHER TRAINING COLLEGE
DEPARTMENT OF ECONOMICS LEVEL III
Project Analysis and Evaluation Test
NOTE: Attempt all questions, showing all calculations where necessary
QUESTION I (5 marks)
Write TRUE for the correct statement and FALSE for the wrong one. Do not
write T or F in -lace of TRUE or FALSE respectively.
i)
At the end of a project cycle a decision is taken as to whether or
not to execute a project.
ii)
In a non-inflationary period a unit of money today does not
represent a greater real purchasing power than a unit of money a
year hence.
iii)
In determining the payback period taxes and depreciation must be
subtracted from the net cash flows.
iv)
Economic motives of projects are mainly tied to the financial
benefits and expectations from investments.
v)
The internal rate of return is that rate of discount that makes the
net present value of a project greater than zero.
QUESTION II (5 marks)
Provide brief answers to these questions as indicated:
a)
Which concept do you use when the costs of executing a project are far
greater than the estimated costs? (2 or 3 words)
b)
What causes the problem of decided whether or not to commit
resources to a given project? (1 word)
c)
What are the two main determinants of the present value of a sum of
money? (4words)
d)
What name do you give to a constant sum of money receivable for an
indefinite period? (1 word)
e)
The yield on investment refers to which investment criterion? (4
words)
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GOOD LUCK
Man lep I lep
QUESTION III (10 marks)
1)
Compound the sums of 150 million frs and 100,000 frs for 5years at 8
percent per annum. (b) What if these sums were compounded
semiannually?
2)
Using the 72 and 69 rules show how long it takes a give sum of money
to double if the interest rates were 12 percent and 8 percent
respectively.
3)
Four projects W, X, Y and Z have identical initial investments of 20,000
Euros each. Their net income streams are exhibited in the table
below:
YEAR
W
X
Y
Z
1
4000
14000
6000
6000
2 0 0
8000
10000
3
'2000
2000
6000
8000
4
4000
4000
8opo
5
18000
18000
10000
(a)
Rank the projects on the basis of their payback.
(b)
Compute the rate of return on investment of each project and
rank them.
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