Question
can you help me figure out the equipment and bonds sections? I have provided the Excel document as well as the financial assumptions. EQUIPMENT ASSUMPTIONS
can you help me figure out the equipment and bonds sections? I have provided the Excel document as well as the financial assumptions.
EQUIPMENT ASSUMPTIONS
Financial Option 2: Lease of $25 Million in Equipment Rationale for investment:
The businesss current equipment is efficient, but it uses a lot of electricity. The production line also creates significant waste material, including waste plastics. The business is looking into leasing newer, more environmentally friendly equipment that will still allow it to be at least as efficient in production as it is now.
Assumptions to consider:
Annual cash flows generated with equipment: $4 million
Discount rate is 12%
15-year useful life
No salvage value
BONDS ASSUMPTIONS
Financial Option 3: $30 Million Investment in Bonds Rationale for investment:
The business is offering these bonds for sale contracts with another business in China to assemble computer parts. The Chinese business has used child labor in the past, but it claims it has stopped this practice. However, the U.S. business selling these bonds has not investigated to verify whether these claims are true.
Assumptions to consider:
10-year bond
8% coupon
Priced at a discount: $95
Discount rate is 9%
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