BEA140 - Quantitative Methods - Cash Flow - Accounting Assignment Help

Assignment Task:

BEA140: Quantitative Methods Accounting Assignment Help

QUESTION 1

Kim and Lee wish to buy a house and have it paid off in ten years. They have realised that at different stages of their life cycle they will have different capacities to make loan repayments. Their plans and budgets are captured in the tables below:

a) Assuming they make the maximum payments that they have budgeted for, illustrate the cash flows associated with the loan as a fully labelled time line diagram.
(Assume the first repayment occurs one period after they take out the loan.)

b) By breaking this cash flow into three simple annuities, determine the maximum amount that Kim and Lee can borrow if they are to pay off the loan in ten years.

c) Assuming that Kim and Lee borrow the maximum amount that they can afford to pay back in ten years, construct an amortisation table showing the last three
payments.

QUESTION 2
Door2DoorCo are a large courier company who have just received a shipment of X new vans. They wish to lock in a tyre supply contract to keep these vans well-shod over the Y months that they intend to keep the vans. The vans come with low-quality tyres that will need to be replaced in 2 months. Two suppliers, ThriftyTread and WiserWheels have expressed interest at supplying tyres at a fixed price for the duration. The offers are summarised below:

a) For each of the two potential suppliers, illustrate Door2DoorCO’s tyre expenditure for the new vans as a fully labelled timeline diagram. (Remember that there are X
new vans, and assume each van has 4 tyres.)

b) Determine the value in period 2 dollars of the expenditure stream if Door2DoorCo decide to go with ThriftyTreads. [Hint, you will firstly need to find the j3 rate
equivalent to the corporate discount rate, you will then need to find the PV of the expenditure stream in period 2 dollars]

c) Thus determine the present value of the expenditure stream if Door2DoorCo decide to go with ThriftyTreads. [NB this is a bit tricky and is aimed at stronger students]
 

d) Determine the value in period 2 dollars of the expenditure stream if Door2DoorCo decide to go with WiserWheels.

e) Thus determine the present value of the expenditure stream if Door2DoorCo decide to go with WiserWheels [NB this is a bit tricky and is aimed at stronger students]
 

f) Comparing your answers for part (b) with part (d), OR part (c) with part (e), explain which tyre supplier Door2DoorCo should choose.

Suggest three legitimate business considerations which a manager may take into account that might influence or even change the recommendation from part (f). NB
“These tyres are prettier”, “This company will bribe me with a kickback”, or “My wife works for that company” are NOT legitimate business reasons.

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