The annual profit from an investment is $ 25 comma 000 each year for 5 years and the cost of investment is $ 75 comma 000 with a salvage value of $ 40 comma 000. the cost of capital at this risk level is 14%.

YearCashflow[email protected]%             PV

            $                         $

0         (75,000)                1  (75,000)

1-5          25,000          3.4331    85,828

5               40,000          0.5194             20,776

                                                   NPV     31,604

Explanation:

In this question, we need to consider the initial outlay in year 0. The cashflows for year 1 to year 5 will be discounted at present value of annuity factor of 3.4331, which could be obtained from present value of annuity table. The salvage value will be considered in year 5 and discounted at the discount factor for year 5, which could also be obtained from present value table. Thus, net present value is calculated by adding the present value of cash inflows for year 1 to 5 to the present value of salvage value and deduct the initial outlay.

a naked warrant, also known as a covered warrant, is a derivative that allows the holder to buy or sell a security, such as a bond or share. unlike a normal warrant, it is not attached to a newly issued bond or preferred stock.

unsecured bonds: they are not secured by a specific asset, but rather by "the full faith and credit" of the issuer. in other words, the investor has the issuer's promise to repay but has no claim on specific collateral. debt, such as unsecured bond debt, is said to be “subordinated,” or junior, to secured debt.

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