ECON 2310 Lecture Notes - Lecture 5: Cash Flow, Net Present Value, Capital Structure

• School: University of Guelph
• Department: Economics
• Course: ECON 2310
• Professor: B Ferguson

Document Summary

Pv0 = fv/(1 + (r/m))mxt = 801,356/[(1 + (. 12/12))(12x30)] = 801,356/1. 01360 = ,291. C = : a. pv1 = c4/(1+r)3 = 1000/(1. 08)3 = . 83, a. pv30 = c x pvaf(20 years, 10%) = 100,000 x [(1/. 1) 1/(. 1x(1. 1)20] = ,356, a. Current yield = coupon/price: p1 = pv(coupons) + pv(face, return = [coupon + (p1 p0)]/p0 = [60 + (935 923)]/923 = 0. 078 = 7. 8% P1 = 60 x pvaf(9 years, 7 percent) + 1000/1. 079 = . Pvgo = p0 pno growth = 60 45. 45 = . 55: e2 = e1 (1 + roe) = 5 (1. 15) = . 75. P1 = d2/(r g) = ((3/5) 5. 75)/(. 11 - . 06) = . P0 = p1/(1 + r) = 69/1. 11 = . 16 a. = [units x (14 7) 600 (15,000/15)] x (1 - . 40) + (15,000/15) = 4. 2 x units + 40. At break-even level npv = 0 = cost of investment + cash flow x pvaf(15 years, 10%) =>