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Finance Cash Flow Essay

3060 words - 13 pages

1. You are considering a project which generates $10,000 in 6 months and $20,000 in one year and will run you $26,000 today. You know these cash flows are exact. You also have the Treasury yield curve from the Wall Street Journal in front of you and see that the 6-month T-bill is trading at a 4% CBE discount rate and the one-year T-bond (which pays coupons in 6-months and one-year) is trading at par (100) with a yield of 6%. (Rates are CBE). Should you invest in this project?

First I solve the one-year spot rate s: 100 = 3/1.04 + 1.03/(1+s) s = 0.0606
NPV = -26,000 + 10,000/1.04 + 20,000/1.0606 = 2472.64 > 0 Invest in this project

2. You are doing some bookkeeping concerning a ...view middle of the document...

11 | 3750.00 | 273.11 | 500000.00 | 499726.89 |
2 | 4023.11 | 3747.95 | 275.16 | 499726.89 | 499451.73 |
3 | 4023.11 | 3745.89 | 277.22 | 499451.73 | 499174.51 |
4 | 4023.11 | 3743.81 | 279.30 | 499174.51 | 498895.21 |
5 | 4023.11 | 3741.71 | 281.40 | 498895.21 | 498613.81 |
6 | 4023.11 | 3739.60 | 283.51 | 498613.81 | 498330.31 |
7 | 4023.11 | 3737.48 | 285.63 | 498330.31 | 498044.67 |
8 | 4023.11 | 3735.34 | 287.77 | 498044.67 | 497756.90 |
9 | 4023.11 | 3733.18 | 289.93 | 497756.90 | 497466.97 |
10 | 4023.11 | 3731.00 | 292.11 | 497466.97 | 497174.86 |
11 | 4023.11 | 3728.81 | 294.30 | 497174.86 | 496880.56 |
12 | 4023.11 | 3726.60 | 296.51 | 496880.56 | 496584.05 |
13 | 4023.11 | 3724.38 | 298.73 | 496584.05 | 496285.32 |
14 | 4023.11 | 3722.14 | 300.97 | 496285.32 | 495984.35 |
15 | 4023.11 | 3719.88 | 303.23 | 495984.35 | 495681.13 |
16 | 4023.11 | 3717.61 | 305.50 | 495681.13 | 495375.62 |
17 | 4023.11 | 3715.32 | 307.79 | 495375.62 | 495067.83 |
18 | 4023.11 | 3713.01 | 310.10 | 495067.83 | 494757.73 |
19 | 4023.11 | 3710.68 | 312.43 | 494757.73 | 494445.30 |
20 | 4023.11 | 3708.34 | 314.77 | 494445.30 | 494130.53 |
21 | 4023.11 | 3705.98 | 317.13 | 494130.53 | 493813.40 |
22 | 4023.11 | 3703.60 | 319.51 | 493813.40 | 493493.89 |
23 | 4023.11 | 3701.20 | 321.91 | 493493.89 | 493171.99 |
24 | 4023.11 | 3698.79 | 324.32 | 493171.99 | 492847.67 |
25 | 4023.11 | 3696.36 | 326.75 | 492847.67 | 492520.91 |
26 | 4023.11 | 3693.91 | 329.20 | 492520.91 | 492191.71 |
27 | 4023.11 | 3691.44 | 331.67 | 492191.71 | 491860.04 |
28 | 4023.11 | 3688.95 | 334.16 | 491860.04 | 491525.88 |
29 | 4023.11 | 3686.44 | 336.67 | 491525.88 | 491189.21 |
30 | 4023.11 | 3683.92 | 339.19 | 491189.21 | 490850.02 |
31 | 4023.11 | 3681.38 | 341.73 | 490850.02 | 490508.29 |
32 | 4023.11 | 3678.81 | 344.30 | 490508.29 | 490163.99 |
33 | 4023.11 | 3676.23 | 346.88 | 490163.99 | 489817.11 |
34 | 4023.11 | 3673.63 | 349.48 | 489817.11 | 489467.63 |
35 | 4023.11 | 3671.01 | 352.10 | 489467.63 | 489115.53 |
36 | 4023.11 | 3668.37 | 354.74 | 489115.53 | 488760.78 |
37 | 4023.11 | 3665.71 | 357.40 | 488760.78 | 488403.38 |
38 | 4023.11 | 3663.03 | 360.08 | 488403.38 | 488043.29 |
39 | 4023.11 | 3660.32 | 362.79 | 488043.29 | 487680.51 |
40 | 4023.11 | 3657.60 | 365.51 | 487680.51 | 487315.00 |
41 | 4023.11 | 3654.86 | 368.25 | 487315.00 | 486946.75 |
42 | 4023.11 | 3652.10 | 371.01 | 486946.75 | 486575.74 |
43 | 4023.11 | 3649.32 | 373.79 | 486575.74 | 486201.95 |
44 | 4023.11 | 3646.51 | 376.60 | 486201.95 | 485825.36 |
45 | 4023.11 | 3643.69 | 379.42 | 485825.36 | 485445.94 |
46 | 4023.11 | 3640.84 | 382.27 | 485445.94 | 485063.67 |
47 | 4023.11 | 3637.98 | 385.13 | 485063.67 | 484678.54 |
48 | 4023.11 | 3635.09 | 388.02 | 484678.54 | 484290.52 |
49 | 4023.11 | 3632.18 | 390.93 | 484290.52 | 483899.59 |
50 | 4023.11 | 3629.25 | 393.86 | 483899.59 | 483505.72 |
51 | 4023.11 |...

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