3. To raise $5,500,000 to expand into new markets, a very successful laptop manufacturing company issued bonds in the market with a coupon rate of 7.50%, paying interest every 6 months, and redeemable in 17 years. They established a sinking fund to retire this debt on maturity and made equal deposits into the fund at the end of every half-year.

a. If the fund was earning 4.20% compounded semi-annually, calculate the periodic cost of the debt.

Round to the nearest cent

b. Calculate the book value of the debt after 8 years.

Round to the nearest cent

4. A delivery service feels they could increase their profits by purchasing a new truck for $59,000. This should lead to increased profits of $18,500 in the 1st year, $14,500 in the 2nd year, and $11,500 in the 3rd year. It could sell the truck at the end of 3 years for $14,500.

a. If the company's required rate of return is 7.5% compounded annually, what is the Discounted Cash Flow (DCF) of the net returns?

Round to the nearest cent

b. Is this a worthwhile investment?

a. Yes

b. No