do I figure out NPV? $30 Million Investment in Bonds Rationale for investment: The business that’s offering these bonds for sale contracts with another business in China to assemble computer components. The Chinese business is known to have used child labor in the past, but claims it has stopped this practice. However, the U.S. business selling these bonds has not investigated to verify whether these claims are true or not. Assumptions to consider: 10-year bond 8% coupon Priced at a discount: $95 Discount rate is 9% Is the initial investment $30 million? How do I find the annual cash inflows? Is the principal returned $30 million?
How do I figure out NPV?
$30 Million Investment in Bonds Rationale for investment: The business that’s offering these bonds for sale contracts with another business in China to assemble computer components. The Chinese business is known to have used child labor in the past, but claims it has stopped this practice. However, the U.S. business selling these bonds has not investigated to verify whether these claims are true or not. Assumptions to consider:
- 10-year bond
- 8% coupon
- Priced at a discount: $95
- Discount rate is 9%
Is the initial investment $30 million?
How do I find the annual
Is the principal returned $30 million?
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=NPV(B26,I27:R27)-B24
B26 = discount rate of 9%
B24 = initial investment of $30m
I27:R27 = yearly cash flows: what are the cash flows for each year?
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