Unformatted text preview: Return  10% compounded semiannually 10%/2 = .05 or 5% Using Excel Years 6  14 = 8 years x 2 = 16 payments PV of years 614 $13,005.32 Years 14  20 = 6 years x 2 = 12 payments PV = $1,200 x (10.8378) + $1,500 x (8.8633) + $2,840.91 PV of years 1420 $13,294.88 PV = $29,141.22 PV of Bond $2,840.91 PV = $29,141.11 Bond N face value  $20,000 time  20 years Return  10% compounded semiannually PV = $2,840.91 10%/2 = .05 or 5% No coupon payments Time  20 years x 2 = 40 A) What is the price of a share of stock if the firm dows not undertake the new investment? B) What is the value of the investment? NPVGO = Co + C 1 / (1 + R) + (C 2 / R) / (1+R) C) What is the pershare stock price if the firm undertakes the investment? PV = $1,200 x A 16 .05 + $1,500 x A 12 .05 + $20,000 / (1.05) 40 PV = F / (1 + R) T PV = $20,000 / (1 + .05) 40 No Payments $1,200 every 6 months $1,500 every 6 months...
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 Fall '09
 Siad
 Corporate Finance, Investment earnings

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