Ben purchase a single bond note which has a face value of R20,000 and a coupon rate of 7.5%. The bond matures in 10 years and the rate of inflation is expected to be 4.5% per year over this period. His minimum acceptable rate of return (MARR) is 7% (use this value as the discount rate). A. Draw the timeline showing the nominal cash flows over the next 10 years. B. Calculate the inflation index for each year over the whole period (start with 1.0 at Year 0). C. Calculate the real cash flows for each year and show these on the timeline D. Calculate the NPV of all the nominal cash flows using MARR E. Calculate the MARR in real terms (adjusted for inflation) F. Calculate the NPV of all the real cash flows using the answer for E (inflation-adjusted MARR) G. Lastly, calculate the IRR for the real cashflows
Ben purchase a single bond note which has a face value of R20,000 and a coupon rate of 7.5%. The bond matures in 10 years and the rate of inflation is expected to be 4.5% per year over this period. His minimum acceptable
A. Draw the timeline showing the nominal cash flows over the next 10 years.
B. Calculate the inflation index for each year over the whole period (start with 1.0 at Year 0).
C. Calculate the real cash flows for each year and show these on the timeline
D. Calculate the NPV of all the nominal cash flows using MARR
E. Calculate the MARR in real terms (adjusted for inflation)
F. Calculate the NPV of all the real cash flows using the answer for E (inflation-adjusted MARR)
G. Lastly, calculate the
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