The purpose of business aviation is to provide safe, efficient, and convenient air transportation to support the mission and goa
1 answer:
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Answer:
$918.89
Explanation:
For computing the current price of the bond we need to apply the present value formula i.e to be shown in the attachment
Given that,
Future value = $1,000
Rate of interest = 8% ÷ 2 = 4%
NPER = 5 years × 2 = 10 years
PMT = $1,000 × 6% ÷ 2 = $30
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after applying the above formula, the current price of the bond is $918.89
Answer:
The project should be rejected as the payback period of 3.97 years exceeds the required 3 years. So, the correct option is E
Explanation:
The table showing the discounted cash flows of each year:
Computing discounted payback as:
Discounted Payback = Number of years + (Initial Cost - Discounted Cash flow of year 1 + Discounted Cash flow of year 2 + Discounted Cash flow of year 3 / Discounted Cash flow of year 4)
= 3 + ($120,000 - $0 - $28,925.62 - $41,322.31 / $51,226.01)
= 3 + ($49,752.07 / $51,226.01)
= 3 + 0.97
= 3.97
Working Note:
Discounted Cash Flow is computed as:
Discounted cash flow = Cash Flow / (1 + r) ^ n
where
r is rate of return that is 10%
n is number of year
So,
For 1st year:
= $0 / (1 + 0.1) ^1
= $0
For 2nd year:
= $35,000 / (1 + 0.1) ^ 2
= $35,000 / 1.21
= $28,925.61
For 3rd year:
= $55,000 / (1 + 0.1) ^ 3
= $55,000 / 1.331
= $41,322.31
For 4th year:
= $75,000 / (1 + 0.1) ^ 4
= $75,000 / 1.4641
= $51,226.01
