DETAILED SOLUTIONS PLS

Question 3: (2 points) Assume that ABC Inc. is not under budget constraint. They consider two mutually exclusive projects as follow: Year Net cash flows (A) Net cash flows (B) (thousand VND) (thousand VND) 2020 -364.000 -364.000 2021 46.000 320.000 2022 68.000 48.000 2023 68.000 60.000 2024 458.000 75.000 2025 45.000 50.000 3.1. 3.2. If the investors require a return of 11 percent on this investment, calculate the discounted payback, NPV, IRR criterion, respectively. Which project should ABC Inc. choose? Why? (1 point) To raise fund for the chosen project, ABC Inc. decide to issue 5-year bonds at a coupon rate of 5 percent. The bonds make annual payments and are priced at par value of 1.000.000VND, ignore the flotation cost. As an individual investor, choose your own required rate of return and calculate bond valuation at the day the company issues that bond, should you invest in that bond? Why? Which is/are risk(s) when investors buy and hold that bond to its maturity? (0.75 point) Apply Fisher's formula, calculate the real return of investors on the company's chosen project in 2020? (0.25 point) 3.3. Question 3: (2 points) Assume that ABC Inc. is not under budget constraint. They consider two mutually exclusive projects as follow: Year Net cash flows (A) Net cash flows (B) (thousand VND) (thousand VND) 2020 -364.000 -364.000 2021 46.000 320.000 2022 68.000 48.000 2023 68.000 60.000 2024 458.000 75.000 2025 45.000 50.000 3.1. 3.2. If the investors require a return of 11 percent on this investment, calculate the discounted payback, NPV, IRR criterion, respectively. Which project should ABC Inc. choose? Why? (1 point) To raise fund for the chosen project, ABC Inc. decide to issue 5-year bonds at a coupon rate of 5 percent. The bonds make annual payments and are priced at par value of 1.000.000VND, ignore the flotation cost. As an individual investor, choose your own required rate of return and calculate bond valuation at the day the company issues that bond, should you invest in that bond? Why? Which is/are risk(s) when investors buy and hold that bond to its maturity? (0.75 point) Apply Fisher's formula, calculate the real return of investors on the company's chosen project in 2020? (0.25 point) 3.3