Question
What is the present value (PV) of a firms investment in $ 1 million U.S. Treasury Bonds yielding 5%, with a coupon rate also of
What is the present value (PV) of a firms investment in $ 1 million U.S. Treasury Bonds yielding 5%, with a coupon rate also of 5%, and maturing in 30 years. What is the present value (PV) and net present value (NPV) of these bonds? The firms assets earn 15% (ROA), the S&P 500 is expected to earn 12%, and treasury bills yield 3%. (Hint: What is the opportunity cost of capital? Ignore taxes.)
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Finance for Executives Managing for Value Creation
Authors: Gabriel Hawawini, Claude Viallet
4th edition
9781133169949, 538751347, 978-0538751346
