Finance Questions:Valuation of bond, payback period , PI,NPV
Not what you're looking for?
1.You expect to retire in 15 years. Based on your projections, you believe you can afford to put away $1,000 per month over that time. How much will you have at retirement?
After retirement you expect to live for another 20 years, if you already had $200,000 in your account when you started putting away the $1,000 per month, how much would you be able to withdraw each month in retirement?
Assume the current interest rate is 5% and will be 5% when you retire.
2.Cindy Legal was offered three contracts from three different law firms. Which should she choose? Assume the current rate is 4%.
Law firm A Law firm B Law firm C
Terms (in years) 3 4 5
Annual payment $250,000 $200,000 $170,000
Signing Bonus $150,000 $140,000 $100,000
3.What is the value of a Microsoft bond with a coupon rate of 7% and 6 years left to maturity when the YTM is 5%?
If the YTM rises to 8%, will the value of the bond be greater than Par, less than Par, or equal to Par?
4. The following two projects are being considered by XYZ Manufacturing:
Project A
A new machine to manufacture a new product that will cost $150,000 and the following cash stream:
Year 1 Year 2 Year 3 Year 4 Year 5
$35,000 $47,000 $53,000 $65,000 $82,000
Project B
A new marketing plan for their old product that will cost $75,000 to initiate and will return the following cash stream:
Year 1 Year 2 Year 3 Year 4 Year 5
$10,000 $16,000 $25,000 $31,000 $34,000
What is the NPV for each project?
What is the Payback Period for each project?
What is the Profitability Index for each project?
Draw the Net Present Value Profile for each project. Identify the indifference point.
Which project should be chosen?
Assume the WACC is 6%.
Purchase this Solution
Solution Summary
Excel file contains answers of 3 finance questions.
Purchase this Solution
Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.