# Discount Rates & Present Value

Lockheed Martin and CACI International want to sell me a bond that will pay me $100,000 in one year.

1. Using the concept of present value and considering the risk of inflation, high interest rates, etc. what would I pay for this bond today?

2. How would I determine the discount rate given the following financial stats for both companies? If I would pay more than $100,000 for Lockheed Martin how would I calculate that and why?

Lockheed Martin

BETA 0.65

Current Ratio: 1.25.

Current debt/equity: 267.16

Short Ratio: 4.00

Profit Margin 6.05%

Return on Assets: 6.76%

Return on Equity: 106.74

Cash Flow: operating: 3.96B - levered free:2.37B

CACI International Inc.

BETA: 1.38

Current Ratio: 1.53

Total debt/equity: 62.17

Short Ratio: 11.80

Profit Margin: 4.26%

Return on Assets: 7.61%

Return on Equity: 14.52%

Cash Flow: operating: 278.26M - levered free 223.62M

https://brainmass.com/business/bond-valuation/discount-rates-present-value-523106

#### Solution Preview

Answer:

We have,

Yield on a High Yield US corporate bond=1.83% (Source: Bloomberg.com)

Par Value on bond=$1,000

Hence,

Market price of the ...

#### Solution Summary

The discount rates and present values are examined. The expert determines the discount rate given financial stats for both companies.