HW4SOL-1 - Homework 4 - Solution 1. Problem 4.10 Semiannual...

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Unformatted text preview: Homework 4 - Solution 1. Problem 4.10 Semiannual bond dividend is 1000(0.05)/2 = $25 per 6 months. Semiannual interest rate is 5%/2 = 2.5%. PW = -825 + 25(P/A,2.5%,16) + 800(P/F,2.5%,16) = -825 + 25(13.0550) + 800(0.6736) = $+40.26 2. Problem 4.16 Monetary units are in $ million. Calculate PW values to select alternative B. PWA = -200 - 450(P/A,12%,20) + 75(P/F,12%,20) = -200 - 450(7.4694) + 75(0.1037) = $-3553.4525 ($-3.55 billion) PWB = -350 - 275(P/A,12%,20) + 50(P/F,12%,20) = -350 - 275(7.4694) + 50(0.1037) = $-2398.90 ($-2.40 billion) PWC = -475 - 400(P/A,12%,20) + 90(P/F,12%,20) = -475 - 400(7.4694) + 90(0.1037) = $-3453.427 ($-3.45 billion) By spreadsheet, enter the following to display the PW values in $ million units. PWA: = -PV(12%,20,-450,75)-200 PWB: = -PV(12%,20,-275,50)-350 PWC: = -PV(12%,20,-400,90)-475 3. Problem 4.19 (a) Use LCM = 6 years for PW analysis to select method A. PWA = -100,000[1+(P/F,10%,3)] -30,000(P/A,10%,6) -5,000[(P/G,10%,3) +(P/G,10%,3)(P/F,10%,3)] = -100,000[1.7513] -30,000(4.3553) -5,000[2.3291+(2.3291)(0.7513)] = $-326,184...
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This note was uploaded on 03/24/2011 for the course ISEN 302 taught by Professor Ko during the Spring '08 term at Texas A&M.

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HW4SOL-1 - Homework 4 - Solution 1. Problem 4.10 Semiannual...

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