1. Some 8.0 percent semiannual coupon bonds are selling for $935.23. The bonds have a face value of $1,000 and mature in 10 years. What is the expected percentage price increase in these bonds each year (the capital gain yield)?

2. A six-year project has an initial requirement of $350,000 for fixed assets and $50,000 for net working capital. All the net working capital will be recouped at the end of the project. The annual operating cash flow is $150,000 and the discount rate is 10 percent.

b) What is the Net Present Value?

c) What is the Profitability Index?

(a) Fill in the chart as appropriate (there will not be entries in every cell) 0 1 2 3 4 5 6 YEAR Fixed Assets OCF Working Capital Total Cash Flow