Solve all please and you can use financial calculator if necessary Solve all ple

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Solve all please and you can use financial calculator if necessary

Solve all please and you can use financial calculator if necessary 29. Raskin Industries has just issued a bond with a maturity of 8 years and a coupon rate of 4 38%. To fund the coupon payments over the 8 years. Raskin purchases an annuity that earns 3.15% and that pays semiannually. The face value of the bond issue is $50,000,000. The amount of the investment Raskin purchases to fund the bond payments (rounded up to the closest thousand) is closest to: A) S7,630,000. B) $15.259,000 C) S15,365,000 30. Sarbanes PLC is considering expanding a production line. The new equipment for the line will cost $1.237,500. In addition, net working capital will increase by $85,000 and remain at that level for the life of the project. The new line is expected to generate cash flows for the next four years of $275.000. $390,000, $5 10,000, and $735.000. Sarbanes, discount rate for the project is11 .36%. The net present value of the project is closest to: A) $171,176. B) $141.447

Explanation / Answer

29) Semi-annual coupon = 50,000,000 x 4 3/8% / 2 = 1,093,750

Value of annuity can be calculated using PV function

N = 8 x 2 = 16, PMT = 1,093,750, I/Y = 3.15%, FV = 0

=> Compute PV = $15,363,009

Hence, C is correct.

30) On a financial calculator, insert

CF0 = -1,237,500 - 85,000 = -1,322,500, CF1 = 275,000, CF2 = 390,000, CF3 = 510,000, CF4 = 735,000 + 85,000 = 820,000 and I/Y = 11.36%

=> Compute NPV = $141,447

Hence, B is correct.

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