1. The research indicates that business will need to make an investment of $240,000 at the start. After covering operating costs, the business is expecting to generate a cash flow of $44500 annually for 10 years. The current risk-free rate is 2%. The business believes that the profits will be risky and an 8% risk premium is applicable. The total discount rate is 10%. Evaluate this investment.

To raise funds for an investment, the business is considering selling equity. Calculate the value of the equity and price per share with an estimated number of shares of 100,000.

Calculate the price per share, if earnings per share are estimated at AUD 0.33. A comparable business has a price per share of AUD 2.80 and a price/earnings ratio of 10.

Estimate the final share price.

2. Business management is discussing two bond options with underwriters. The first bond has a face value of $100,000 and pays 5.5% coupon semi-annually for 10 years. The market yield on this bond is 5.75%. The longer term bond has a 6.05% coupon rate, pays coupon annually for 30 years and has a market yield of 6.05%. The face value on this 30 year bond is $100,000. Calculate the bond prices for a 10 year semi-annual coupon bond and for a 30 year annual coupon bond and their repayment schedules.