What is the expected pw cost of the building

Reference no: EM13185691

The university is selling bonds to cover the cost of a new power plant for UAF. The face value on the bonds is $100 million and is to be repaid in 10 years with coupons paid annually. There is a 15% chance the effective interest rate will be 5%, 25% chance the effective interest rate will be 6%, 20% chance the effective interest rate will be 7%, 15% chance the effective interest rate will be 8%,10% chance it will be 9%, and a 5% chance it will be 10%. There is also a slim chance the legislature will provide the full funding and bonds don't need to be sold, a 5% chance. There is also a 1% chance that a donor will come forward and put their name on the building and pay 10% of the cost. What is the expected PW cost of the building?

Reference no: EM13185691

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