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To illustrate the traditional discounted cash flow approach, let's assume that Company A has issued a 1 0 % bond that is due in 1
To illustrate the traditional discounted cash flow approach, let's assume that Company A has issued a bond that is due in years and has a face value of $ Assume further that the riskadjusted market rate that reflects the credit risk of Company is 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
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