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Discount Rate and Present Value

The following information lists the questions and gives background on the company in question.
I would appreciate very much if you could help me to get on the right track on what I have to do to get the right answer.
Questions:
1. How much would you pay for a \$ 100,000 Raytheon bond today given risk, interest rate, inflation (no math equasion
2. Based on the previous question, what would be your discount rate for this Bond? Use present value formula and show the work.
0.70 BETA
1.63 CURRENT RATIO
49.96 TOTAL DEBT TO EQUITY
3.30 SHORT RATIO
8.02 %PROFIT MARGIN
7.87% RETURN ON ASSETS
20.38% RETURN ON EQUITY

Solution Preview

See the attached file for solution.

The price which an investor would be willing to pay for a \$100,000 Raytheon bond would depend on number of adjusting factors like risk, inflation and interest rate. There is risk that the bond purchased today for some amount, say x would not be able to provide even that amount in the future. It could be due to many reasons including inability of company to pay investors in future. This risk is high for Raytheon as debt to equity ratio is ...

Solution Summary

The following posting helps with calculations for bonds and discount rates.

\$2.19