Reference no: EM132595729

Question No 1: Tuscany company bond have an annual coupon rate of 8 percent and a par value of 1000 and will mature in 3 years. If you require a return of 3.5 percent, what price would you willing to pay for the bond? Interpret your results.

Question No 2: An investment proposal is expected to have cash flows for a project as given below for each year below in the table. The cost of project is $1000 today.

a) Calculate its Payback period and Net present value using the discount rate 13%. 

b)If the Corporation is expecting to return its invested capital to recover in 4 years, either the corporation should accept the project or reject it on basis of payback period.

c) Decide on the basis of NPV either project should accepted or rejected.

No of year Expected cash flows

01 500

02 400

03 300

04 100

Question No 3: Edwin Company was recently having mixed capital structure with equity and debt with given amount in each capital as market value terms:

Debt $75,600

Preferred stock $43,400

Common stock $ 24,5000

The preferred stock pays at 15 percent .The cost on debt after tax is considered to be as 14 percent on overall. Corporation offer 750 shares. Edwin expected that the cost of common stock to be 6 percent in the coming year. Compute the firm's present weighted average cost of capital.