# FIN504.W4 - P6-13 Valuation of assets Asset A End of Year 1...

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P6-13 Valuation of assets Asset End of Year Amount PVIF or PVIFA A 1 \$5,000 2 \$5,000 3 \$5,000 Calculator Solution B 1–∞ \$300 1/0.15 C 1 \$0 2 \$0 3 \$0 4 \$0 5 \$35,000 0.476 Calculator solution: D 1 through 5 \$1,500 3.605 6 \$8,500 0.507 Calculator solution: E 1 \$2,000 0.877 2 \$3,000 0.769 3 \$5,000 0.675 4 \$7,000 0.592 5 \$4,000 0.519 6 \$1,000 0.456 Calculator solution:
\$10,870.00 \$10,871.36 \$2,000.00 \$16,660.00 \$16,663.96 \$5,407.50 \$4,309.50 \$9,717.00 \$9,713.40 \$1,754.00 \$2,307.00 \$3,375.00 \$4,144.00 \$2,076.00 \$456.00 \$14,112.00 \$14,115.27 Present Value of Cash Flow
P6-17 Bond Table Values A. (1) ( 2 ) ( 3 ) B. Bond Value vs. Required Return Bond Value Required Return (%) \$1,225.96 15% \$1,000.12 11% \$783 8% C. D. Bond value and changing required returns B 0 = \$110 x (6.492) + \$1,000 x (0.286) B 0 = \$110 x (5.421) + \$1000 x (0.187) B 0 =\$110 X (7.536) + \$1000 x (0.397) If the required return is less than the coUpon rate, the greater than par, then the bond sells at a premium. The discount if the return is greater than the coupon rate a is less than the par value. Two possible reasons that could cause the required ret the coupon rate are economic risks and firm risks.
Calculator Solution \$1,000.12 \$783 \$1,225.96 market value is e bond sells at a and the market value turn to differ from 15% 11% 8% \$800.00 \$850.00 \$900.00 \$950.00 \$1,000.00 \$1,050.00 \$1,100.00 \$1,150.00 \$1,200.00 \$1,250.00 Bond Value vs Required Return Required Return Bond Value
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