Question

(In millions), my 1st year OCF = .5107, 2nd year = .6740, 3rd year = .811, 4th year = .795, and 5th year = .632. In the 4th year I will donate $400,000 (.4) to charity and in the 5th year I will donate $200,000 (.2).    My initial investment was $500,000 (.5). I will issue 1 personal bond with coupon rate of 5.74% and five years until maturity. Bond price on issue date is $978.50. The personal bond has a maturity value of $100,000. I also will issue 1 share with a dividend in one year of $5.29. Expected growth is 4.9% per year. They are willing to pay $68.36 per share of equity. Using the financial calculator, calculate NPV. Compute and Draw the NPV-IRR profile.

Answer 1

		1	2	3	4	5
Initial Investment	(0.5000)
Operating Cash Flow		0.5107	0.6740	0.8110	0.7950	0.6320
Expected Outflow					(0.4000)	(0.2000)
Total Cash Inflow/ (Outflow)	(0.5000)	0.5107	0.6740	0.8110	0.3950	0.4320
Present Value factor 9.4%	1	0.914	0.836	0.764	0.698	0.638
Present value	(0.5000)	0.4668	0.5632	0.6194	0.2758	0.2757	1.7008
IRR	113%
Costs of Debt	6.25%	0.5	0.03125
Costs of Equity	12.64%	0.5	0.063192
			9%
Costs of Debt
PV	97800
FV	100000
I/Y ( Calcuated)	6.25%
N	5
PMT	5740
Costs of Equity r= D1/P0+g	5.29/$68.36+4.9 =		12.64%