Hard Spun Industries (HSI) has a project that it expects to produce a cash flow of $1.8
Question:
Hard Spun Industries (HSI) has a project that it expects to produce a cash flow of $1.8 million over 13 years. To finance the project, the company needs to borrow $1.0 million today. The project will also produce interim cash flows of $100,000 per year that HSI can use to pay service vouchers of $50,000 every six months. Based on the risk of this investment, market participants will require a return of 11.0%. If HSI wants a 13-year maturity (to coincide with the arrival of the lump sum cash flow), what should be the face value of the bond? Remember that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualised basis.
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford