Answer:
a. $87,750.56
b. Accept the investment, because it gives a positive net present value.
Explanation:
the net present value is the today`s value of future cash flows. We determine the net present value by discounting the future cash flow using the required return or the cost of capital.
Using a Financial calculator this can be determined as :
- $185,000 CF0
$ 87,000 CF 1
$ 46,000 CF 2
$ 72,000 CF 3
$ 132,000 CF 4
$ 41,000 CF 5
i/yr = 12%
Then, SHIFT NPV gives $87,750.56
We accept an investment only and only if it has a positive net present value.
Purchasing mangers or purchasing agents
Answer:
6%
Explanation:
Data provided as per question is as given below:-
Redeemed amount = $1,000
Sale value of Bond = $687.25
Number of year = 5
The computation of interest rate is as shown below:-
Interest rate = (Redeemed amount ÷ Sale value of bond) ^ (1 ÷ Number of Year) - 1
= (1,000 ÷ 747.25) ^ (1 ÷ 5) - 1
= (1.338) ^ (0.2) - 1
= 0.06
= 6%
