3. a) Lotus Semiconductor issued a 20-year bond 12 years ago. It had a $1,000 par value and paid 8% annual interest compounded quarterly. Your required rate of return on the bond is 10%. How much are you willing to pay for this bond?

3. b) Your company currently has a net cash flow of $400,000. You expect the net cash flows to grow at a constant rate of 2% if you make no new investments. However, you have just been offered an opportunity to invest in a swimsuit business that is projected to generate $250,000 of NPV. You require a rate of 9% for your investments and there are currently 100,000 shares outstanding in your company. What is the price per share if you don't undertake the swimsuit business? What is the price per share if you undertake the swimsuit business?