razy Racoon is now considering another bond issue that would settle on June 30, 2020 and mature 30 years. Because the company wants to limit interest payments it has decided, along with the investment ankers, to issue the bond with a low 3.00% coupon even though the market will demand a 6.00% yield to haturity on the bond. Assuming semiannual interest (2 coupons per year) razy Racoon has an old bond trading in the secondary market with a low 3.0% coupon. This bond had been sued during a period of very low interest rates at a par value of 100.00 (which means the full $1,000.00 face alue of the bond). It pays interest semiannually. ssume the date is June 30, 2020 and the maturity date of the bond is June 30, 2030. the bond is trading at 77.00 (= $770.00 per $1,000.00 bond) what is the Yield to Maturity (YTM) f the bond?

12. The initial investment for a geothermal power plant is $60,000,000 and is to be paid in two years (year 0 and year 1) equally. The electricity generated by the plant is expected to bring revenue of 10,000,000 per year increasing at a rate of 3% annually. The total annual expenses of the plant will be 1,500,000 increasing at a rate 4% annually. The company that owns the plant plans to borrow 50% of the capital expenditure at a rate 6%. The discount rate for this company is 12% and its taxation rate is 35%. A 10 year depreciation period is allowed for this power plant. The plant is expected to generate electricity for 30 years after which it will have zero value. What is the present value of this investment? Should the company undertake the investment? 13. What would be the answer to the plant of problem 12 if the company were allowed to borrow 80% of the cost of the geothermal power plant at an annual rate of 5%.

A loan of nominal amount £200000 in bonds of nominal amount £100 is to be repaid by 20 annual drawings, each of 100 bonds, the first drawing being 1 year after the issue date. Interest will be payable quarterly in arrears at the rate of 8% per annum. Redemption will be at par for the first 10 drawings and at 140% thereafter. An investor, who will be liable to income tax at the rate of 10%, purchases the entire loan on the issue date at a price to obtain a yield per annum of 5% net effective. What price does the investor pay for the entire loan?

4. You have developed an innovative new project that is estimated to produce an annual revenue stream (money in) of $15,000 per year for the next 10 years. Your current corporate cost of Money is 4%. However, in year 5, your CFO projects that rate will rise to 6% for the remaining five years of the project's lifespan. What is the NPV of this money in cashflow today? (we are ignoring any money out costs)