Illustration of valuation using multiple discount rates, Financial Management

Assignment Help:

Illustration 

Let us assume that Vishal Mehta & Co., (from Illustration 1) is using the following discounting rates in place of one rate:

Year

Discounting Rate (%)

2007

   7.50

2008

   8.30

2009

   8.75

2010

   9.50

2011

10.15

In this situation, what is the PV of all cash flows as on 31st December 2007?

Solution

Table : Calculation of PV of 7% Bond using Different Discounting Rates of Each Cash Flow

Year

Cash Flow (in Rs.)

PV (in Rs.)

2007

    7

  6.51

2008

    7

  5.97

2009

    7

  5.44

2010

    7

  4.87

2011

107

65.99

 

Present Value =

88.78                              


Related Discussions:- Illustration of valuation using multiple discount rates

Planning, how to do assignments based on these topics more specifically?

how to do assignments based on these topics more specifically?

Written report on company, I have a assignment of financial accounting It...

I have a assignment of financial accounting Its a report on company Assignment length 2000 words

Income statement, Income Statement A formal statement of the parts...

Income Statement A formal statement of the parts used in determining an organization net income that is called profit and loss statement. The several categories reported

Explain why the company would probably not issue $1 million, Refer to the B...

Refer to the Bulldog battery company's cash budget in Table 18-7.  Explain why the company would probably not issue $1 million worth of new common stock in January to avoid all sho

Life insurance - property and causality insurance, What are the differences...

What are the differences between life insurance and property and causality insurance? Life insurance prevents against death, retirement and illness. Companies obtain premiums b

State the rate of return of a bond - debt securities, Rate of return of a B...

Rate of return of a Bond In case of bonds, rather than dividends, investor is entitled to payments of interest yearly or semi-annually. Investor also benefits if there is an ap

Rating scale, Rating denote an issuer's ability to respond to adverse...

Rating denote an issuer's ability to respond to adverse changes in circumstances and economic conditions. The rating scale is generally differentiated into variou

Example on walters dividend model, Q. Example on Walters dividend model? ...

Q. Example on Walters dividend model? Example: - The following information is obtainable in respect of a firm: Capitalisation Rate (Ke)                     = 10% Earning

Sensex, What is Financial index & commodity index? Method of index uses in ...

What is Financial index & commodity index? Method of index uses in calculation? Weighted average method? How to calculate index?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd