Cullumber Company purchases a licence from Redo Industries for the right to manufacture and sell products using Redo's processes

and technologies. Cullumber estimates it will earn $$4,800$ per year from this licence over the next $10$ years $($at the end of each year$).$

Assume Cullumber uses $8\%$ as the discount rate. What is the value in use to Cullumber of this licence? $($Round present value factor

calculations to $5$ decimal places, eg$.1\mathrm{.}25124$ and the final answer to $0$ decimal places, e$.$g$.5,275.)$

Click here to view Table A$\mathrm{.}4-$ PRESENT VALUE OF AN ORDINARY ANNUITY OF $1$

The value in use

$

eTextbook and MediaTo illustrate the traditional discounted cash flow approach, let's assume that Company A has issued a $9\%$ bond that is due in $10$ years

and has a face value of $$400.$ Assume further that the risk$-$adjusted market rate that reflects the credit risk of Company $A$ is $9\%.$ This

rate would be the rate that the market would demand of Company A$,$ given the specific credit risk. The credit risk is the risk that the

company will not be able to repay the bond. This would be influenced by factors such as the economy $($whether things are good or bad$),$

the company's business model $($whether it is sustainable or not$),$ and the company's cash position. If the market feels that the company

is riskier, then the market will demand a premium.

How would you calculate the present value of the bond $($fair value$)?($Round present value factor calculations to $5$ decimal places, eg$.$

$1\mathrm{.}25124$ and the final answer to $0$ decimal places, eg$.5,275.)$

Click here to view Table A$\mathrm{.}2-$ PRESENT VALUE OF $1-($PRESENT VALUE OF A SINGLE SUM$)$

Click here to view Table A$.4-$ PRESENT VALUE OF AN ORDINARY ANNUITY OF $1$

Bond's present value $

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