6. Net Present Value A golf resort is redoing its golf course at a cost of $2,74
ID: 2762007 • Letter: 6
Question
6. Net Present Value
A golf resort is redoing its golf course at a cost of $2,744,320. It expects to generate cash flows of $1, 223,445, $2,007,812, and $3,147,890 over the next three years. If the appropriate discount rate for the firm is 13 percent, what is the NPV of this project?
NPV
7. Preferred Stock Value
The National Bank of Columbia has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.50 on this stock. What is the current price of this preferred stock given a required rate of return of 8.5 percent?
Price
6. Net Present Value
A golf resort is redoing its golf course at a cost of $2,744,320. It expects to generate cash flows of $1, 223,445, $2,007,812, and $3,147,890 over the next three years. If the appropriate discount rate for the firm is 13 percent, what is the NPV of this project?
NPV
10 Paints 5. Yield te Mat ity An invesr buys a 15-year bond with a $1,000 face vale for $950. The bonds coupon rate is 8 percent and interest payments are made semi-anally. Usng the YTM (yield to maliily) appruximaion foma, whatis the bond's yield to malily YTM Approx YTM = Appror YTAM C = Coupon/ Interest Payment F = Face Value P = Price n-years to maturityExplanation / Answer
Answer 5)
YTM = coupon interest + (Face value - redemption )/n/( face value + redemption )/2
coupon interest = face value * coupon rate = 1000* 8% = 80 per annum since the interest is semi anually
hence we need to divide the rate by 2 and multiply the no of years by 2 hence rate = 4% and no of years 30 years
therefore coupon interest = 40
= (40 +(1000-950)/30/(1000+950)/2)
= 41.67/975
= 4.28 = 4.3% is the YTM
Answer 6)
To compute the NPV of the project :
Hence the NPV of the project is $2,092,432
Answer 7)
Price of the preferred stock = Dividend /Rate
= $1.5/.085
Hence the price is $17.65
Thank you.
Project First Cost Formula discount 13% Present value 0 -$2,744,320 1 1 -$2,744,320 1 $1,223,445 1/1.13^1 0.88 $1,082,695 2 $2,007,812 1/1.13^2 0.78 $1,572,411 3 $3,147,890 1/1.13^3 0.69 $2,181,646 Net present value $2,092,432Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.