• You just heard one of your colleagues saying that NPV=0 means that the project makes no profit no loss? Do you agree with your friend? Explain. Describe how share prices should respond to a (NPV=+) and a (NPV=-) management decisions. Consider only financial claimants to a firm's cash flows.

• Dubai Manufacturing Co. has a bond of $1000 par value outstanding. It pays interest annually and carries an annual coupon rate of 8%. Bonds are issued 2 years ago & due in 10 years. If the market rate of return on bonds is 7%. Required:

a. What is the current price of the bond? Explain whether the bond will sell at a discount or a premium?

b. Would the price of the bond be any different if interest was paid semi-annually instead of annually?Explain?

c. Explain what would happen to the bond price 5 years from now if the market interest rate remained the same at 7%. Explain what would be the market value of the bond at maturity date.

• Suppose you borrowed $15,000 at a rate of 9% and must repay it in 5 equal installments at the end of each of the next 5 years.What is the outstanding balance of the loan at the end of second year?

• You plan on depositing $10,000 at the end of each year for 30 years into a retirement account that pays 5% interest. How much could you withdraw annually in equal beginning of year amounts starting at the time you make your last deposit and continuing for a total of 20 years, assuming balances continue to earn 5% until withdrawn?