Golden Finance Ltd is a small investment company. It is looking for financial assets to add to its investment for 2023. As aninvestment officer of Golden Finance, you are interested in the following assets:• A preferred share issued by Apple Company, which pays a fixed dividend rate of 13%, face value of $100..• A non-callable bond issued by Orange Company, which pays 9% coupon rate semi-annually, with face value $1000.The bond will mature in 20 years and has a yield to maturity of 8%.The Company Management also requested you to evaluate two mutually exclusive investment portfolios with thefollowing cash flows to recommend one for the next year's investment:Year2022-Initial InvestmentFuture cash flow2023202420252026Portfolio A ($) Portfolio B($)70,00080,00025,00030,00040,00045,00035,00040,00050,00055,000Required:1. Compute the current value of Apple Company's preferred share, given the rate of return for the same type of shares inthe same industry is 12%2. Compute the current value of the Orange Company's non-callable bond.3. Recommend to Golden Finance's Management which portfolio it should accept, using a rate of return of 14%, applyingthe profitability index NPV criterion.

Profitability index of a project is calculated as shown below.

investment officer of Golden Finance, you are interested in the following assets: • A preferred share issued by Apple Company, which pays a fixed dividend rate of 13%, face value of $100. • A non-callable bond issued by Orange Company, which pays 9% coupon rate semi-annually, with face val The bond will mature in 20 years and has a yield to maturity of 8%. The Company Management also requested you to evaluate two mutually exclusive investment portfolios with following cash flows to recommend one for the next year's investment: Year 2022-Initial Investment Future cash flow 2023 Portfolio A ($) Portfolio B(S) 70,000 80,000 25,000 35,000

investment officer of Golden Finance, you are interested in the following assets: • A preferred share issued by Apple Company, which pays a fixed dividend rate of 13%, face value of $100. • A non-callable bond issued by Orange Company, which pays 9% coupon rate semi-annually, with face val The bond will mature in 20 years and has a yield to maturity of 8%. The Company Management also requested you to evaluate two mutually exclusive investment portfolios with following cash flows to recommend one for the next year's investment: Year 2022-Initial Investment Future cash flow 2023 Portfolio A ($) Portfolio B(S) 70,000 80,000 25,000 35,000

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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