Question

			12%	Cumulative
		Cumulative		Discounted
t	CFt	Cash flows	PV (CFt)	Cash flows
0	($1,800,000)
1	$900,000
2	$1,500,000
3	($1,000,000)
4	$800,000
5	$1,400,000

Calculate NPV-IRR-MIRR-PI-Payback-Discounted Payback

12%

Bond A

par =	$1,000
maturity (years) =	10
coupon rate =	8%
YTM on comparable bonds =	6%
interest paid =	annually
par =	$1,000
maturity (years) =	10
coupon rate =	8%
YTM on comparable bonds =	9%

Bond B

	par =	$1,000
	maturity (years) =	30
	coupon rate =	4%
	YTM on comparable bonds =	3%
	price at 6% =
	interest paid =	semi-annually
	par =	$1,000
	maturity (years) =	30
	coupon rate =	4%
	YTM on comparable bonds =	4.5%

d. YTM

par =	$1,000
maturity (years) =	10
coupon rate =	8%
interest paid =	annually
price =	$1,150

Answer 1

1).

NPV = 790,394.06

IRR (using IRR function) = 29.43%

MIRR (using MIRR function) = 29.43%

Payback period = 3 years + (CCF3/CF4) = 3 + (400,000/800,000) = 3.5 years

Discounted payback period = 4 years + (CFCF4/PV(CF5)) = 4 + (4,003.54/790,394.06) = 4.00504 years

Profitability index (PI) = PV of all cash inflows/PV of all cash inflows

= (803,571.43 + 1,195,790.82 + 508,414.46 + 794,397.60)/(1,800,000 + 711,780.25) = 1.31