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Please indicate formulas used, answers and explanations My teacher said to not use the PV formula that excel gives, PLEASE HELP Imagine you are the

Please indicate formulas used, answers and explanations My teacher said to not use the PV formula that excel gives, PLEASE HELP

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Imagine you are the manager of a company in the energy industry. Suppose you know that for a $100 million investment today you could develop a fuel cell technology that you could license to auto companies for $10 million per year forever starting after about a decade of research and development (see below for the precise timing). Until then, it would earn nothing (the scientists are still working on it in the lab). For simplicity, assume you would have no costs apart from the initial $100 million. To raise the $100 million, however, you would have to issue a bond (just as corporations or government agencies do). A bond is basically a legally enforceable IOU: in exchange for money today, your company agrees to make specified payments in the future. In this case, suppose you could raise $100 million today by issuing a bond promising to pay $7 million per year until year 10, at which time you would pay an additional $7 million plus the original $100 million. Using a spreadsheet program, determine whether it would be a good idea to go ahead with the project if the interest rate were 5%. That is, would it be profitable to borrow the money and make the investment? What is the present value of the project? How would the PV and your decision be affected if the interest rate were 4% or 6% instead? Turn in a your spreadsheet for the 5% case. Make sure there's enough text and documentation that it will be clear how you arrived at your results when the sheet is printed. To eliminate ambiguities about the timing of payments, here's how to set things up. The investment would cost $100 million in year 0 (today) and would produce $10 million of income per year with the first payment in year 11. The bond would raise $100 million in year 0, would cost you $7 million in years 19, and would cost $107 million in year 10 (7+100)

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