Consider a corporate bond with a $1000 face value, 8% coupon with semiannual coupon payments, 7 years until maturity, and a YTM
1 answer:
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Answer:
Following is attached the solution or the question given.
I hope it will help you a lot!
Explanation:
Formulas for calculation are mentioned in D column. By simply putting '=' sign they will calculate the answer as given in column C.
Answer:
The Project should be rejected.
The Net present value is lower than zero. Meaning the returns on the investment yields a loss, as we are not able to cover our initial investments.
Explanation:
The Present value of the inflow and outflow should be considered before deciding the viability of the project.
Using the Net Present Value approach, we will want to consider against the outflows and at a certain cost of capital/rate of return if this projects meets at least the minimum threshold of breaking even. At this point the net cash flow would be at least zero for the project to be accepted.
Kindly review the document attached for detailed workings.
