Capital Budgeting | Value Bond And Share | WACC

Running Head: CAPITAL BUDGETING 0
Capital Budgeting
(Student Name)
2/13/2020

CAPITAL BUDGETING 1
Table of Contents
Value a bond.............................................................................................................. 2
Value a share............................................................................................................. 3
Weighted Average Cost of Capital.............................................................................. 4
Free Cash Flow........................................................................................................... 6
Net Present Value....................................................................................................... 7

CAPITAL BUDGETING 2
Value a bond
Bond is one of the instruments of debts which provide a periodic stream of interest
payment to its shareholders or investors while repaying the principal amount on
particular maturity date. Therefore, the value of the bond is majorly obtained by
discounting the expected cash flow of the bond to the current with using an suitable
rate of discount. Furthermore, the bond value is calculated by using the approach
of present value. The formula for calculating a bond price by using the basic present
value is explained as:
 Y= the yield to maturity (YTM)
 C= the periodic coupon payment
 T = the number of periods unit the
 F= the par of bond or face value
 t= time
For example the bond has a face value of $1000 and the coupon rate is 4% which
will be mature in 4 years. The bond makes payments of yearly coupon. In such case
maturity yield is 4%, then the value of bond is resolute as: