financial management -milestone 3

Milestone 3: Investment Valuation and Capital Budgeting

1. Bond and Stock Valuation Problems:

   • Bond Valuation Problem:

     • Face Value: $1,000, Coupon Rate: 7%, Time to Maturity: 10 years, Yield to Maturity: 6%.

   • Deliverable:

     • Calculate the bond’s value. (Word or Excel Document covering the calculation step by step)

2. Capital Budgeting Case Study:

   • Scenario:

     • Company Y is evaluating a new project requiring a $500,000 investment with expected annual cash inflows of $120,000 for 6 years. The required rate of return is 10%.

• • Tasks:

    • Identify potential funding sources for this project (internal funds, loans, bonds, or equity) and discuss the advantages and disadvantages of each.

• • Compute NPV (Net Present Value), IRR (Internal Rate of Return), and Payback Period for the project.

Evaluate the impact of financing choice:

• • How does the selected financing option affect the company’s financial structure and risk level?

• • Provide a recommendation:

• • Should the company proceed with this investment?

  • Justify your answer based on financial calculations and funding strategy.

• Deliverable:

• • Calculate NPV, IRR, and Payback Period.

  • Provide a 500 word analysis recommending whether to proceed with the project.