How to calculate present value?, Financial Management

Illustration 

Vishal Mehta & Co., Mumbai issued 7%, 5-year bond on 31st December 2006. The par value of a bond is Rs. 100. This bond pays interest annually and discount rate 6% should be used to calculate the present value of each cash flow. The bond is redeemed at par after five years. Find out the PV of the bond on 31st December 2006.

Solution

Calculation of PV of 7% Bond using Single Discounting Rate

Year

Cash Flow (in Rs.)

PV (in Rs.)

2007

       7

   6.60

2008

      7

   6.23

2009

     7

   5.88

2010

     7

   5.54

2011

107

  79.96

 

Present Value =

104.21                              

Posted Date: 9/10/2012 5:37:38 AM | Location : United States







Related Discussions:- How to calculate present value?, Assignment Help, Ask Question on How to calculate present value?, Get Answer, Expert's Help, How to calculate present value? Discussions

Write discussion on How to calculate present value?
Your posts are moderated
Related Questions
Portfolio Management: Project Portfolio Management (PPM) is the centralized management of processes, technologies and methods used by project management offices (PMOs) and pro

ON THE BASIS OF FLEXIBILITY • Fixed budget: this is designed to stay unchanged irrespective of the volume of output or turnover attained.  The budget remains unchanged over

What are the types of major types of finance companies? There are three main types of finance companies: a. Sales finance institutions which make loans to customers of a cer

The following guidelines are applicable for the issue of Fully Convertible Debentures (FCDs), Partly Convertible Debentures (PCDs) and Non-conve

QUESTION 1 [25 marks] Xelo Ltd, whose current sales consist of fixed operating costs of R140 000 and variable operating costs equal to 22% of sales, has made the following two sale

What is the meaning of statement- Earn out arrangements These arrangements take place during acquisition of another company. Parent company agrees to pay additional money if

Rights of Investors CERTIFICATES An investor is entitled to receive shares/unit certificates allotted to him within a period of 6 weeks from the date of closure of the sub

What is an LBO? What are the risks for the equity investors and what are the potential rewards? A leveraged buyout is a buy of a publicly owned corporation by a small group of

stauffer , inc., has estimated sale and purchase requirments for the last half of coming year. parepare cash budget for the month of

Q. Dividend Yield plus Growth in Dividend process? Dividend Yield plus Growth in Dividend process: - This process is used to compute the cost of equity capital when the dividen