Problem 5. Your company is AA-rated by a credit-rating agency, and must borrow money according to the table 1 provided if it will start several projects that have been proposed. See the following table 2 for each project proposals project description, their duration and anticipated return: Table 1. Maturity 2 yr AA 2 yr A 5yr AAA 5yr AA 5yr A 10yr AAA 10yr AA 10yr A 20yr AAA 20yr AA 20yr A Rate, i% 1.32 1.48 1.94 2.22 2.51 2.69 3.26 3.53 3.97 4.21 4.42 Table 2. Projects a. New Delivery Vehicles b. Updated Computer Hardware c. Updated Computer Software d. Corporate Rebranding e. Relocate Headquarters f. Parts Inventory System Which of the projects shown in table 2 should we undertake and why? Duration (yrs) 5 yrs 2 yrs 5 yrs. 10 yrs 20 yrs 10 yrs Expected Return, ROR (%) 9% 1% 3% 3.5% 6% 3%
Problem 5. Your company is AA-rated by a credit-rating agency, and must borrow money according to the table 1 provided if it will start several projects that have been proposed. See the following table 2 for each project proposals project description, their duration and anticipated return: Table 1. Maturity 2 yr AA 2 yr A 5yr AAA 5yr AA 5yr A 10yr AAA 10yr AA 10yr A 20yr AAA 20yr AA 20yr A Rate, i% 1.32 1.48 1.94 2.22 2.51 2.69 3.26 3.53 3.97 4.21 4.42 Table 2. Projects a. New Delivery Vehicles b. Updated Computer Hardware c. Updated Computer Software d. Corporate Rebranding e. Relocate Headquarters f. Parts Inventory System Which of the projects shown in table 2 should we undertake and why? Duration (yrs) 5 yrs 2 yrs 5 yrs. 10 yrs 20 yrs 10 yrs Expected Return, ROR (%) 9% 1% 3% 3.5% 6% 3%
Chapter1: Introduction To Finance For Entrepreneurs
Section: Chapter Questions
Problem 4EP
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