a. Calculate the present value of total outflows. (Do not round intermediate calculations and round your answer to 2 decimal places.) PV of total outfows b. Calculate the present value of total inflows. (Do not round intermediate calculations and round your answer to 2 decimal places.) PV of total outflows c. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value
a. Calculate the present value of total outflows. (Do not round intermediate calculations and round your answer to 2 decimal places.) PV of total outfows b. Calculate the present value of total inflows. (Do not round intermediate calculations and round your answer to 2 decimal places.) PV of total outflows c. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Appendix D Present value of an annuity of $1, PVa
PV-A1-
(1+ i
Percent
Period
1%
2%
3%
4%
5%
6%
7%
9%
10%
11%
12%
0.990
0.980
0.971
0.962
0.952
0.943
0.935
0.926
0.917
0.909
0.901
0.893
2.
1.970
1.942
1.913
1.886
1.859
1.833
1.808
1.783
1.759
1.736
1.713
1.690
2.941
2.884
2.829
2.775
2.723
2673
2.624
2.577
2.531
2487
2.444
2.402
4
3.902
3.808
3.717
3.630
3.546
3.465
3.387
3.312
3.240
3.170
3.102
3.037
4.853
4.713
4.580
4.452
4.329
4.212
4.100
3.993
3.890
3.791
3.696
3.605
...
5.795
5.601
5.417
5.242
5.076
4.917
4.767
4.623
4.486
4.355
4.231
4.111
6.728
6.472
6.230
6.002
5.786
5.582
5.389
5.206
5.033
4.868
4.712
4.564
7.652
7.325
7.020
6.733
6.463
6.210
5.971
5.747
5.535
5.335
5.146
4.968
8.566
8.162
7.786
7.435
7.108
6.802
6.515
6.247
5.995
5.759
5.537
5.328
10
9.471
8.983
8.530
8.111
7.722
7.360
7.024
6.710
6.418
6.145
5.889
5.650
10.368
9.787
9.253
8.760
8.306
7.887
7.499
7.139
6.805
6.495
6.207
5.938
11.
16 ..
11.255
10.575
9.954
9.385
B.863
8.384
7.943
7.536
7.161
6.814
6.492
6.194
13
12.134
11.348
10.635
9.586
9.394
8.853
8.358
7.904
7.487
7.103
6.750
6.424
14
13.004
12.105
11.296
10.563
9.899
9.295
8.745
8.244
7.786
7.367
6.982
6.628
15
13.865
12.849
11.938
11.118
10.380
9.712
9.108
8.559
8.061
7.606
7.191
6.811
16
14.718
13.578
12.561
11.652
10.838
10.106
9.447
8.851
8.313
7.824
7.379
6.974
17
15.562
14.292
13.166
12.166
11.274
10.477
9.763
9.122
8.544
8.022
7.549
7.120
18
16.398
14.992
13.754
12.659
11.690
10.028
10.059
9.372
8.756
8.201
7.702
7.250
19
17.226
15.678
14.324
13.134
12.085
11.158
10.336
9.604
8.950
8.365
7.839
7.366
20
18.046
16.351
14.877
13.590
12.462
11.470
10.594
9.818
9.129
8514
7.963
7.469
25
22.023
19.523
17.413
15.622
14.094
12.783
11.654
10.675
9.823
9.077
8.422
7.843
30
25.808
22.396
19.600
17.292
15.372
13.765
12.409
11.258
10.274
9.427
8.694
8.055
40
....
32.835
27.355
23.115
19.793
17.159
15.046
13.332
11.925
10.757
9.779
8.951
8.244
21.482
18.256
13.801
8.304
50
39.196
31.424
25,730
15.762
12.233
10.962
9915
9.042
Transcribed Image Text:The Bowman Corporation has a bond obligation of $24 million outstanding, which it is considering refunding. Though the bonds were
initially issued at 13 percent, the interest rates on similar issues have declined to 11.7 percent. The bonds were originally issued for 20
years and have 10 years remaining. The new issue would be for 10 years. There is a 9 percent call premium on the old issue. The
underwriting cost on the new $24,000,000 issue is $540,000, and the underwriting cost on the old issue was $430,000. The company
is in a 35 percent tax bracket, and it will use an 12 percent discount rate to analyze the refunding decision. Use Appendix D for an
approximate answer but calculate your final answer using the formula and financial calculator methods.
a. Calculate the present value of total outflows. (Do not round intermediate calculations and round your answer to 2 decimal
places.)
PV of total outflows
b. Calculate the present value of total inflows. (Do not round intermediate calculations and round your answer to 2 decimal places.)
PV of total outflows
c. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations
and round your answer to 2 decimal places.)
Net present value
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