What semiannual rate of return did an investor make

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1. Four years ago, Chevron issued $5 million worth of debenture bonds with a coupon rate of 10% per year, payable semiannually. Market interest rates dropped, and the company called the bonds (i.e., paid them off in advance) at a 10% premium on the face value. Therefore, it cost the corporation $5.5 million to retire the bonds. What semiannual rate of return did an investor make who purchased a $5000 bond 4 years ago and held it until it was called 4 years later?

2. A tool and die company in Hanover is considering the purchase of a drill press with fuzzy-logic software to improve accuracy and reduce tool wear. The company has the opportunity to buy a slightly used machine for $15,000 or a new one for $21,000. Because the new machine is a more sophisticated model, its operating cost is expected to be $7000 per year, while the used machine is expected to require $8200 per year. Each machine is expected to have a 25-year life with a 5% salvage value. Tabulate the incremental cash flow.

Reference no: EM13881877

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