Question

21. A company estimates an NPV of a project under three different set of ossumptions (Beor, Bose, Bull) to evoluate forecasting iskj management agrees to undertoke the project if the weighted average NPV for Based on the scenario analysis performed, the Fohe? Evoluate the a. True b. Fose Today is lonuery 1, 2019 (T-O,. You take out a 6 yeor fully omortizing outo loan of $23,000. Payments ore mode at the end of each colender mant he loon hos o fixed onnol role of 40%(or 40%/12per month. of the loan at the end of the 2nd month (inmediately after moking the secoed monthly payment), the amount of money you would owe the outo dealership is closest to e. $23,70 Assume you decide to moke sooner would you pay off the outo loon a 18 b. 20 d. 24 e. 48 con change os the Company (which trodes under the ticker TAP) would best be deteriorate (e.g during the housing crisisL TAP's opereting margin would most likely increase significonly significontly emon the some remain the some 2S. A creditor is willing to offer you $5,000 today in the form of o pure dincount loon, an interest only loon, oon. Each loon is for on 8 year peried where you will pay interest one time per year (if opplicoble). While you are willing to pay the creditor onnual interest, you do not wont to returm ony of the $5,000 in principle for 8 yeon. You would oso prefer to pay os lile interest over the lifetime of the bond os possible. The best bondsl for you to choose (if any) would be the o The pure discount bond b. The c. The d. None of the bonds satlsty your constroin e. Any of bondh would work os they are ell for the some omount of money only bond

Answer 1

		NPV	Probability	NPV*probability
1-	bear	-100	30%	-30
	base	35	50%	17.5
	bull	65	20%	13
	weighted average NPV			0.5
	TRUE	because weighted average NPV is positive
2-	Monthly payment = Using PMT function in MS excel	pmt(rate,nper,pv,fv,type)rate = 4%/12 nper = 12*6 = 72 pv = 23000 fv = 0 type =0	PMT(4%/12,72,23000,0,0)	($359.84)
	period	beginning balance	monthly payment	Interest =4%/12 = .333%	Priniciple	year end balance
	0					23000
	1	23000	359.84	76.59	283.25	22716.75
	2	22716.75	359.84	75.6467775	284.1932	22432.56
	amount owe to dealship at the end of 2nd month = 22432.56
3-	Month to pay off the loan	Using nper function in MS excel	nper(rate,pmt,pv,fv,type) rate = 4%/12 = .3333% pmt = -503.5 pv =22432.56 fv =0 type =0	NPER(0.333%,-503.5,22432.56,0,0)	48.30671	48.30671
4-	cyclical company- decrease significantly
5-	answer is D	none of the bonds would staisfy your constraints	because none kind of bond provide loans on these conditions