How much would you pay for one of these bonds

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Reference no: EM132033999

1. Project S costs $20,000 and its expected cash flows would be $6,500 per year for 5 years. Mutually exclusive Project L costs $27,000 and its expected cash flows would be $13,100 per year for 5 years. If both projects have a WACC of 14%, which project would you recommend?

a. Both Projects S and L, since both projects have NPV's > 0.

b. Neither Project S nor L, since each project's NPV < 0.

c. Project S, since the NPVS > NPVL.

d. Project L, since the NPVL > NPVS.

e. Both Projects S and L, since both projects have IRR's > 0.

2. Company A has issued 15-year coupon bonds with a face value of $1,000 and a 6.75 percent coupon rate. The bonds pay annually. How much would you pay for one of these bonds if you require a 7.5 percent yield to maturity?

Reference no: EM132033999

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