1. Jesus Saves Ltd. is offering 2 million units of 10-year bonds with a face value of...
1. Jesus Saves Ltd. is offering 2 million units of 10-year bonds with a face value of GH¢100 each. Though the bonds are being offered at a price of GH¢95 each, the bonds will be redeemed at GH¢110. The annual coupon rate of the bonds is 15%. Interest is payable at the end of every six months. A provision in the bond indenture requires that Jesus Saves Ltd. establishes a sinking fund to accumulate enough money to pay the total redemption value of the bonds upon maturity. To comply with this provision, Jesus Saves Ltd. plans to set aside an even amount at the end of each quarter over the next 15 years. Each of the even amounts that will be set aside will be invested at an annual interest rate of 12% with quarterly compounding. Calculate the even amount that should be put into the sinking fund at the end of each quarter to raise enough money to pay the total redemption value of the bonds.
2. God is king Ltd. is embarking on long-term investment, involving an immediate outlay of GH¢25,000 which they intend financing by retained profits. Expected annual net cash profits are as follows:
Years 1 to 4: GH¢3,000
Years 5 to 7: GH¢5,000
Year 8 onwards forever: GH¢7,000
The company discounts all projects lasting ten years' duration or less at a cost of capital of 10% and all other projects at a cost of 13%. You may ignore taxation . Find the Net present value