Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Project Introduction:

This project allows you to think seriously and apply decision-making management methods. In this project, you require to solve a bond portfolio problem, a diversified portfolio problem and a cash flow problem. The tasks in the project pertain to the concepts of Time Value Money, Financial Return Risk and Capital Budgeting Analysis. Diligent assessment of such concepts by the business heads can make sure the long-term survival of a business. If you play any role in the finance or are in pursuit of one, the project learning will help you to relate with the real-time requirements of the business.

Task 1:

a) You own a two-bond portfolio. Each has a par value of $1,000. Bond A matures in 5 years, has a coupon rate of 8 %, and has an annual yield to maturity of 9.20 percent. Bond B matures in 15 years, has a coupon rate of 8 % and has an annual yield to maturity of 9.20 %. Both bonds pay interest semi-annually.

What is the value of your portfolio? What occurs to the value of your portfolio if each yield to maturity rises by one percentage point?

b) Instead of own a five-year bond and a 15-year bond, assume you sell both of them and invest in two 10-year bonds. Each has a coupon rate of 8 % (semi-annual coupons) and has a yield to maturity of 9.20 %. Determine the value of your portfolio? What happens to the value of your portfolio if the yield to maturity on the bonds rises by one percentage point?

c) Based on your answers to (a) and (b), assess the price changes between the two portfolios. Were the price changes the same? Why or why not?

Task 2:

Annual savings from Project X comprise a reduction of ten clerical employees with annual salaries of $15,000 each, $8,000 from reduced production delays, $12,000 from lost sales due to inventory stock-outs, and $3,000 in reduced utility costs. Project X costs $250,000 and will be depreciated over a 5-year period by using straight-line depreciation. Incremental expenses of the system comprise two new operators with annual salaries of $40,000 each and operating expenses of $12,000 per year. The firms’ tax rate is 34 percent.

a) Determine Project X’s initial cash outlay.

b) Find out the project’s operating cash flows over the 5-year period.

c) If the project’s required return is 12 percent, must it be implemented?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91165

Have any Question? 


Related Questions in Basic Finance

1 what is the base salary of the international assignee2

1. What is the base salary of the international assignee? 2. How much is the G&S differential and how was it calculated? 3. How much is the housing differential and how was it calculated? 4. What type of allowance did th ...

The spot rate for the danish krone is usd01500 and the

The spot rate for the Danish krone is USD0.1500 and the three-month forward rate is USD0.1505. Your company is prepared to speculate that the Danish krone will move to USD0.1650 by the end of three months. (a) Are the qu ...

1 what does it mean to say that a currency trades at a

1. What does it mean to say that a currency trades at a forward premium? 2. Explain how the law of one price establishes a relationship between changes in currency values and inflation rates. 3. Why does purchasing power ...

1 complete the following table2 comment on the following

1 .Complete the following table: 2 .Comment on the following statement: "Forward rates are good predictors of future interest rates.

1 what is business culture does national culture affect

1. What is business culture? Does national culture affect business culture? Discuss some implications of national culture for business culture. 2. Discuss how national culture affects the business culture and the busines ...

1 why do researchers use inferential statistics2

1. Why do researchers use inferential statistics? 2. Distinguish between the null hypothesis and the experimental hypothesis. 3. When analyzing data, why do researchers test the null hypothesis rather than the experiment ...

Explain how a short call added to a protective put forms a

Explain how a short call added to a protective put forms a collar and how it changes the payoff and up-front cost? Explain the process by which the profit of a short straddle closed out prior to expiration is influenced ...

A 10-year bond with a par value equaling 1000 pays 7

A 10-year bond, with a par value equaling $1,000, pays 7% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semi-annual analysis.

Imagine that your town or city has increased its nighttime

Imagine that your town or city has increased its nighttime police patrols to reduce crime. Design two quasi-experiments to determine whether this intervention has been effective, one that uses some variation of a nonequi ...

1 discuss some of the advantages and disadvantages of

1. Discuss some of the advantages and disadvantages of setting up production in LCCs. Consider the benefits of market growth and the risk of an example venture. 2. Look at the information on the RDEs discussed in the tex ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro