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What is the payback period for project

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Reference no: EM131318283

G- Value company is considering two investments, both of which costs $20,000. The firm's cost of capital is 15 percent (%). The cash flows are as follows:

YEAR

PROJECT A

PROJECT B

1

12,000

10,000

2

8,000

6,000

3

6,000

16,000

REQUIRED: (SHOW ALL WORKINGS)

  • What is the payback period for each project? Which project would you accept based on the payback period and why?
  • What is the discounted payback for each period? Which project would you accept based on the discounted payback criterion and why?
  • Calculate the NPV of each project? Which project would you choose based on the NPV criterion and why?
  • Based on the IRR criteria which project would you choose if they were mutually exclusive? (SHOW ALL WORKINGS)

Johnson Brothers Ltd; has bonds outstanding that matures in 7 years and pays a 6 percent (%) semi-annual coupon.

What will the bond price be for one of these bonds if the par value is $1,000 and the market interest rate is 8.0 percent (%) Calculate and explain what would happen to the value of the bond if the market interest rate falls from 8.0 percent (%) to 6.0 percent (%) What is the YTM?List the key features of a bond.

Explain what is meant by net proceeds in the context of a bond sale. Provide an example.

Reference no: EM131318283

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