Illustration of valuation using multiple discount rates, Financial Management

Illustration 

Let us assume that Vishal Mehta & Co., (from Illustration 1) is using the following discounting rates in place of one rate:

Year

Discounting Rate (%)

2007

   7.50

2008

   8.30

2009

   8.75

2010

   9.50

2011

10.15

In this situation, what is the PV of all cash flows as on 31st December 2007?

Solution

Table : Calculation of PV of 7% Bond using Different Discounting Rates of Each Cash Flow

Year

Cash Flow (in Rs.)

PV (in Rs.)

2007

    7

  6.51

2008

    7

  5.97

2009

    7

  5.44

2010

    7

  4.87

2011

107

65.99

 

Present Value =

88.78                              

Posted Date: 9/10/2012 5:48:47 AM | Location : United States







Related Discussions:- Illustration of valuation using multiple discount rates, Assignment Help, Ask Question on Illustration of valuation using multiple discount rates, Get Answer, Expert's Help, Illustration of valuation using multiple discount rates Discussions

Write discussion on Illustration of valuation using multiple discount rates
Your posts are moderated
Related Questions
what are the characteristics of relative cost

Introduction to financial management: Meaning and defecation of the financial management Finance function Scope and content of financial function Functions and

Investment intermediaries An investment intermediary includes finance companies, mutual funds, investment banks and securities firms.

a) Social marketing is the use of normal marketing methods to achieve the benefits of social change, such as informing the public about the harm of under-age drinking, rather than

What is the basic goal of a business? The primary financial goal of the business organizations is to maximize the wealth of the firm's owners.  In turn Wealth refers to value.

Question 1: "The governance of modern states demands that a relentless struggle be waged against the scourge of corruption." Discuss. Question 2: Explain clearly how th

Why do businesses spend time, effort, and money to produce forecasts?  Explain. Businesses succeed or fail relies on how well organized they are to deal with the situations they

Rationale of Accounting Standards Accounting Standards are created along with a view to harmonise various accounting policies and practices in use inside a country. The goal o

In a putable bond, the bondholder has the right to force the issuer to pay off the bond prior to the maturity date. Let us consider the previous example with the

5 Define risk. Examine the need for assessing the risks in a project.