Question 1

Project 'Mars' creates the following cash flows. You will need to invest $25,000 and starting at the end of Year 1 you will receive a cash flow of $5,000 until the end of Year 10. The cost of capital is 5%.

Find the following based on the project cash flow:

a. Payback Period

b. Discounted Payback Period

c. NPV

d. Approximate IRR

e. Profitability Index

Question 2

Five years ago, you bought a brand new bond with a maturity equal to 20 years. It pays an 8% coupon. When you bought it five years ago it was at a discount because at the time, the market rate on a similar bond was 9%. The market rate is now 7% and you have decided to sell this bond. Based on this information,

a. What is your yield on the bond based only on capital appreciation?

b. What is your yield on the bond based only on the coupon payments?

c. What is your total yield on the bond when you sell it?

Attachment:- adm2413_-_assignment_2_winter_2016.pdf