Suppose that a risk free project will generate the following cash flows: $400 in year 1, $500
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$400 in year 1, $500 in year 2, $500 in year 3, $600 in year 4, $600 in year 5.
The prices of risk free, zero coupon bonds with $1000 face value and different maturities are:
$940 for 1-year maturity, $870 for 2-year maturity, $760 for 3-year maturity, $640 for 4-year maturity, $500 for 5-year maturity.
Given these risk free bonds, what is the price (i.e., discounted present value) of the project?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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