1) Applied Software has a $1,000 par value bond outstanding that pays 13 percent interest with annual payments The current yield to maturity on such bonds in the market is 10 percent Compute the price of the bonds for these maturity dates (Use a Financial calculator to arrive at the answers Do not round intermediate calculations Round the final answers to 2 decimal places ) Price of the bond a 25 years $ b 20 years $ c 9 years $ 2) Kings Department Store is considering the purchase of a new machine at a cost of $18,392 The machine will provide $4,100 per year in cash flow for six years Kings cost of capital is 13 percent a What is the IRR ( Use a Financial calculator to arrive at the answers Round the final answer to the nearest whole percent ) IRR b Using the IRR method, evaluate this project and indicate whether it should be undertaken multiple choice Yes No

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Question: 1) Applied Software has a $1,000 par value bond outstanding that pays 13 percent interest with annual payments. The current yield to maturity on such

Applied Software has a $1,000 par value bond outstanding that pays 13 percent interest with annual payments. The current yield to maturity on such bonds in the market is 10 percent.

Compute the price of the bonds for these maturity dates: (Use a Financial calculator to arrive at the answers. Do not round intermediate calculations. Round the final answers to 2 decimal places.)

	Price of the bond
a. 25 years	$
b. 20 years	$
c. 9 years	$

2) Kings Department Store is considering the purchase of a new machine at a cost of $18,392. The machine will provide $4,100 per year in cash flow for six years. Kings cost of capital is 13 percent.

a. What is the IRR? (Use a Financial calculator to arrive at the answers. Round the final answer to the nearest whole percent.)

IRR %

b. Using the IRR method, evaluate this project and indicate whether it should be undertaken.

multiple choice

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