A local couple is deciding to invest their lifetime savings of $68,000.00 into a Fijian business. They are considering t
Posted: Thu May 26, 2022 6:59 am
A local couple is deciding to invest their lifetime savings of
$68,000.00 into a Fijian business. They are considering two
businesses. Business A, in the food and beverage (FNB) industry,
provides an annual cash income of about $8,000 for 10 years.
Business B, in the clothing and textiles industry, provides an
annual cash income of $7,500 for 11 years commensurate with their
level of investment. If the couple on the other hand decide to
leave their lifetime savings into a fixed deposit at their current
bank, which is a large international bank, they would get about 1.5
percent per annum. The economy is currently in the expansionary
phase of the business cycle. However, it is forecasted that a
severe global downturn is expected in 1 years’ time and the
resulting recession will last about 1 year thereafter. During the
recession, it is expected that cash flows in the FNB industry will
fall by 40 percent per annum. In the clothing and textiles
industry, it is expected that cash flows will fall by about 35
percent per annum. The general elections are expected to be held in
4 years’ time. Policy changes around taxation could be expected but
at present are uncertain.
Required:
$68,000.00 into a Fijian business. They are considering two
businesses. Business A, in the food and beverage (FNB) industry,
provides an annual cash income of about $8,000 for 10 years.
Business B, in the clothing and textiles industry, provides an
annual cash income of $7,500 for 11 years commensurate with their
level of investment. If the couple on the other hand decide to
leave their lifetime savings into a fixed deposit at their current
bank, which is a large international bank, they would get about 1.5
percent per annum. The economy is currently in the expansionary
phase of the business cycle. However, it is forecasted that a
severe global downturn is expected in 1 years’ time and the
resulting recession will last about 1 year thereafter. During the
recession, it is expected that cash flows in the FNB industry will
fall by 40 percent per annum. In the clothing and textiles
industry, it is expected that cash flows will fall by about 35
percent per annum. The general elections are expected to be held in
4 years’ time. Policy changes around taxation could be expected but
at present are uncertain.
Required: