Example 61. An investor want to purchase a 3 year Rs 100 face value bond ng nominal interest rate of 6%. What should be the purchase price if the stors required rate of return is 8% and the bond is to mature at par.

Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery…

A: Given, The cost of equipment is $80 million Net working capital is $20 million.

Q: 4800 accumulating to 5994.78 compounded monthly for 4 years. what is the interest rate?

A: We need to use compound interest formula to calculate interest rate A=P(1+i)n where A=Accumulated…

Q: If international trade barriers were removed, how would it impact the PPP and the IFE? Would they be…

A: A trade barrier is a governmental restriction on the movement of international products or services.…

Q: Sue purchased a stock for $45 a share, held it for one year, received a $2.34 dividend, and sold the…

A: Purchase price (P0) = $45 Sale price (P1) = $46.45 Dividend (D) = $2.34

Q: You want to create an endowment income of $35,000 per year for Oxfordshire Charity, bit the first…

A: The amount that should be invested today is the present value of all future endowment payments.…

Q: Having achieved immense success since graduating from university, you have set up an endowment fund…

A: Amount deposited today (A0) = $100000 Growth rate (g) = -2% r = 10%

Q: Financial analysts forecast GDY Inc.’s growth for the future to be 5%. GDY's recent annual dividend…

A: The stock value can be calculated with the help of dividend growth model

Q: Referring to the table below is the information about three RM1000 par value bonds and each of which…

A: Given Three bonds Bond 1, Bond 2 and Bond 3.

Q: What is your expected annual rate of return for this portfolio: stock A 1000 shares at $22/share…

A: Given, Stock A has 1000 shares at $22/share Stock B has 750 shares $11.50/share Bond $25000 Money…

Q: b. A farmer is considering replacing a labor-intensive machine system with a more capital- intensive…

A: The initial investment and incremental cash flows: The initial investment in a project involves all…

Q: Neverland Company, a retailer, plans to sell 15,000 units of Product X during the month of August.…

A: Sales = 15000 units Opening stock = 2500 units Closing units = 2000 units

Q: 6. Jake and Archie are looking for places to live. Jake decides to rent a house for $1400 Archie…

A: Interest is compounded semiannually, which means it is compounded once every six months. As a…

Q: #1 Matthew makes a series of payments at the beginning of each year for 20 years. The first payment…

A: Present value of a future amount With interest rate (i), period (t) and future value (FV), the…

Q: The Michner Corporation is trying to choose between the following two mutually exclusive design…

A: Profitability index is the ratio of the present value of cash flow to the initial investment and…

Q: 20.Calculate the present value (principal) and the compound interest (in $). Use Table 11-2. Round…

A: The present value and interest figure can be calculated as per principle of time value of money

Q: On January 1, 2013, Janet buys a bond for $10,000 that makes coupon payments of $600 after each of…

A: Here, Coupon Payment is $600 Face Value of Bond is $10,000 Time to maturity remaining at Feb 1, 2014…

Q: This is an amortized loan, because its payments contain: O Only the principal that must be repaid…

A: An amortized loan is that loan in which scheduled periodic payments are made. The payments are made…

Q: What is the relation between the present value of an investment and time and interest rate?

A: The concept of present value of an investment and time and interest rate is an important concept of…

Q: Machine X Machine Y $ 6,000 7 years $12,000 13 years $4,000 $175 Initial Cost Estimated Life Salvage…

A: Solution : If we having two option for purchase of Machine & cost/ Expenses details was given of…

Q: What is the bond’s yield to maturity? (Do not round intermediate calculations. Enter your answer as…

A: Yield to maturity refers to the total return generated by a bond until it matures. Yield to maturity…

Q: felix jones, a recent engineering graduate, expects a starting salary of $35,000 per year. his…

A: Present value is defined as the current value of the future sum of funds or the cash flows stream at…

Q: 4.Using Table 11-1, compute the amount of compound interest (in $) earned in 1 year and the annual…

A: The compound interest earned and the APY can be solved as per principle of time value of money

Q: A Montana state bond can be converted to $1,000 within 5 years of purchase. If the Montana bonds are…

A: Value of the bonds can be calculated as: = Maturity Value / (1+i)^n Where, i = interest rate per…

Q: Q7-3. If interest is compounded more than once a year, will the effective interest rate be higher…

A: Nominal interest rate is the stated interest rate, where as effective interest rate is the rate…

Q: Required information An electric switch manufacturing company is trying to decide between three…

A: We will calculate the future worth of all the 3 methods. We will select the method which has the…

Q: Assume Merck (MRK) just finished paying an annual dividend of $2.1 (for 2019). You look up their…

A: GivenRisk free rate = rf =1.96%Beta=B=0.34Dividend=D=$2.1Market risk premium= rm-rf =9.9%Stock…

Q: Sadik Inc.'s bonds currently sell for $1,289.00 and have a par value of $1000. They pay a $105.00…

A: N 8   PMT 10.5% of 1000 $105 PV $1289   FV $1307         I/Y 8.28%

Q: A project starts with an initial capital outflow of RM450,000 in exchange for the following likely…

A:

Q: ou purchase a house for $250,000 by getting a mortgage for $200,000 and paying a $50,000 down…

A: Loan amount (PV) = $200,000 Interest rate = 4% Monthly interest rate (r) = 4%/12 = 0.33333333333%…

Q: Is the present value of an ordinary annuity more valuable than an annuity due? Explain.

A: Annuity is a series of even cash flows for a specified duration. It involves regular cash outflow or…

Q: Sara owns a small business and plans on retiring in 5 years. Given his past experiences, she expects…

A: To find if it is a good investment, the calculation for the required return should be done first.…

Q: The display cases above were purchased at the beginning of the month and are being depreciated at a…

A: A financial plan is a forecast of a company's cash flows over a set period of time  that is weekly,…

Q: Baguio Rabbitry must replace the piping system in its barn. Based on cost of capital of 12% which of…

A: Annual worth is calculated by multiplying the annual worth factor for the given cost of capital by…

Q: ery month. What is the APR?

A: APR is annual percentage rate of credit card which is charged based on monthly basis interest rate.

Q: If the corporate tax rate was 25 percent, what were the firm's income taxes for each year? Round…

A: Tax refers to the amount charged by the government on individuals, partnership firms, HUF’s or any…

Q: FedEx Corp. stock ended the previous year at $103.39 per share. It paid a $0.35 per share dividend…

A: Since the dollar return is over all income and capital return in a given period. Dollar Return=…

Q: A 5-year project will require an investment of $100 million. This comprises plant and machinery…

A: Working Note #1 Calculation of depreciation: Year 1 2 3 4 5 Opening Balance ($) 80000000…

Q: C. Paxton Company provided the following income statement for last year: P 87,021,000 (62,138,249) P…

A: Times interest earned ratio shows how many times a company can cover its interest expense with its…

Q: QUESTION 7 A corporation decides to deposit a fixed payment per quarter into an account earning 8%…

A: Compound interest is the interest that is charged on the principal amount as well as interest…

Q: Imagine you work for a company that uses gainsharing. Do you think you would like it? Why or why…

A: Gainsharing is a management system that encourages employees to improve their performance by…

Q: nges in Growth and Stock Valuation: Consider a firm that had been priced using a 8 percent growth…

A: P = D/(r-g), P is current price, D is the next expected dividend  g is Expected growth rate in the…

Q: Chupapi Inc. has a gross profit ratio of 16.67 % for the year 2020. If Chupapi Inc. has gross profit…

A: Gross Profit Margin = Gross Margin for the year/Net Sales for the Year

Q: Value of Future Cash Flows: A firm recently paid a $0.30 annual dividend. The dividend is expected…

A: Recent dividend  = $0.30 Annual growth for first 4 years = 8% Stock price after 4 years = $60…

Q: Strategic Workforce Planning at Dutch Railway Infrastructure Manager- ProRail Traffic Control Dutch…

A: Treasury managers typically monitor the financial condition of an organization and help ensure the…

Q: You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of…

A: Amount available to invest = $ 10000Return of X = 12.4%Return of Y = 10.1% Desired return from…

Q: 8. Scott took a short position for 500 ounces of July gold at $653.25 per ounce. He did not close…

A: Initial margin In order to trade in exchange, investors have to deposit the initial margin…

Q: Quèstion 12 What is the covariance of returns between stocks A and B? Expected retum of A is 30% and…

A: Data given: Expected return of A =30% Expected return of B = 23.333333% Year Return A Return B…

Q: If an investor buys shares in a no-load mutual fund for $33 and after eight years the shares…

A: Mutual funds refer to one type of financial vehicle that pools money from many investors and invests…

Q: A stock currently sells for 50 and can rise by 6 or fall by 4 for each of the next two periods. The…

A: Current market price Values at the end of period one Values at the end of period two Value of call…

Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery…

A: Cost of equity with constant growth rate in dividends forever With next year dividend (D1), current…

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like: