When the market interest rate rises, the value of a bond rises falls stays the s

Question

When the market interest rate rises, the value of a bond rises falls stays the same cannot be determined without more information You are considering purchasing a large compactor for your firm. The compactor will cost $95,000, plus $5,000 for an extender. Use of the compactor is expected to increase the firm's revenues by $95,000 per year and increase the costs by $25,000 per year before depreciation. The compactor will be depreciated using 5 year straight-line depreciation. Your firm's marginal tax rate is 40%. What is the operating cash flow in Year 1 ? $40,000 $50,000 $60,000 $65,000 Rogers company, Inc., is considering purchasing a new grinding machine with a useful life of 5 years. The initial outlay for the machine is $175,000, with an additional $25,000 in essential customization. The required rate of return for Dave Company, Inc., is 12.75%. The expected cash flows are as follows: Year/After-tax Expected Cash Flow 1/$30,000 2/$40000 3/$60000 4/$80000 5/$60000 6/$50000 Calculate the simple payback period 3.69 years 3.88 years 4.36 years 4.99 years

Explanation / Answer

6)

Bond price and market interest has inverse relationship. If interest rates rises bond price will fall and if the market interest rates falls bond price will rise.

Hence, correct option is “Falls”.

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