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Valles Global University (VGU) has decided to build a dormitory on campus for 1000 students that includes a spa and cafeteria for students at their
Valles Global University (VGU) has decided to build a dormitory on campus for 1000 students that includes a spa and cafeteria for students at their urban New Jersey campus. VGU has estimated construction costs of $75 million. A wealthy alumna offers to kick in 25 million dollars and VGU will sell bonds to raise the rest. The VGU bonds are five-year bonds and have a par value of $1000 and pay 6% compounded semi-annually. Assume the VGU bonds are all sold. VGU uses an investment rate of 4% per year. 1. Develop a revenue plan that will allow VGU to pay the interest and principal of the bonds. (How much revenue do they need per period to pay the interest and the $50,000,000 back?) 2. Suppose similar bonds are currently paying 10% in the bond market. How much would VGU receive per bond? Will they be able to build their dormitory with this bond sale? Explain your
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