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Price of a six-year $1000 face-value bond

1 Calculate the NPV and the IRR for the following project and state whether or not you would accept the new project.

Required rate of return = 9%
Current prime rate = 11%
Initial outflow = $75,000
Inflows = $25,000 for years 1-3
= ($10,000) for year 4
= $30,000 for year 5
= $10,000 for year 6

2 Calculate the payback period for the following investment: A machine costs $100,000 with installation costs of $15,000.
Cash inflows are expected to be 26,000 per year for the next seven years.

3. Given the following information, calculate the net present value:
Initial outlay is $50,000; required rate of return is 10%; current prime rate is 12%; and cash inflows for the next 4 years are $60,000, $30,000, $40,000, and $50,000.

4 Calculate the IRR for the following investment project: Initial investment is $75,000; inflows are $20,000 for the next five years; Required rate of return is 15%. (Round your answer to the nearest whole percentage).

5 Calculate the price of a six-year $1000 face-value bond with a 7% annual coupon rate and a yield-to-maturity of 6% with semi-annual coupon payments.

6 All but which of the following would affect dividend policy?

a. a firm's need for funds
b. prospectus restrictions
c. stockholders' expectations
contractual restrictions

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1 Calculate the NPV and the IRR for the following project and state whether or not you would accept the new project.

Required rate of return = 9%
Current prime rate = 11%
Initial outflow = $75,000
Inflows = $25,000 for years 1-3
= ($10,000) for year 4
...

Solution Summary

This provides the steps to calculate the price of a six-year $1000 face-value bond

$2.19