lVoda NZ 13.42 30% a s3-ap-southeast-2.amazonaws.com C FINA 201 Assignment Total 100 marks 1. You are considering opening a new plant. The plant will cost $96 million upfront Affer that, it is expected to produce constant profits at the end of every year (the first profits arrive at t-). The cash flows are expected to last forever. The discount rates 7% At what profits amount would you breakeven in the plant investment? [13marks] 2. A bond has the following information Par value: $1,000 Matunity seven years Coupon rate: 10.5% with semiannual coupon payment Yield to maturity: 8 Is this bond currently trading at a discount, at par, or at a premium? Explain 7.5marks) If the YTM rises to 9%, at what price will the bond trade? [7.Smarksl .5% - a) b) 3. You are a real estate agent thinking of placing a sign advertising your services at a local bus stop. The sign will cost $10,000 and will be posted for one year. You expect it wil gemerate additional revenue of $1500 per month c) What is the payback period? [7.Smarks a) What is the discounted payback period if the discount rate is 1% p month? 7.Smarks) SlowGrowth Corporation currently pays a dividend of $2.3 per year. Stock analysts expect the company would continue to pay the current dividend amount for throe years and, after the three years, increase dividend by 2% per year in perpetuity. Accordeg to the stock analysts forecast of future dividends, what should be the stock price today if the discount rate is 4%? [ 1 5 marks] S. You are deciding between two mutually exclusive investment projects Both roquire the same upfront investment of $9.8 mallion. Investment A will generate $2 million per year in perpetuity (starting from the end of the first year) and Investment B will generate $1.45 mallion per year at the end of first year and, after the first year, its revenuc will grow at 2.6% per year in perpetuity. The discount rate is 7.8%. a) Which project has a higher IRR?[7.5 marks] b) Which project would you choose to invest? Why? (7.3 marks]