1. ABC Corporation is deciding whether to capitalize on the Artificial Intelligence craze by
purchasing a popular "AI" chatbot. ABC Corporation could buy the chatbot for $75.0 million
cash. ABC Corporation suspects the chatbot would be useful to them for two years, at which
time technological growth would make it nearly obsolete. In the first year, ABC Corporation
expects cash flows from subscriptions and advertising of $5.5 million, $6.8 million, $7.6 million,
and $8.3 million, respectively. In the second year, ABC Corporation expects cash flows from
subscriptions and advertising of \$8.0 million, \$6.4 million, \$3.8 million, and \$1.1 million. At
the end o its two-year life, the chatbot could be sold for $4.0 million a) ABC Corporation assigns
a discount rate of 23.5% to this project, should they invest? (23 marks) b) The IRR for this
project is 21.5%. Based on IRR and ignoring the result from part a), should ABC Corporation
invest? (2 marks) 2. DEF Corporation has just issued a straight bond. The bond pays 12.0%
annual interest, makes semi-annual payments, and has a maturity of 25 years. Face value of the
bond is $100.0. a) You believe a reasonable market rate of interest for this bond is 12.25%, what
price should the bond be? (10 marks) b) What is the duration of the DEF Corporation bond? (10
marks) c) If the market interest rate increased by 1.0%, what new price would you expect the
bond to trade at? What if the market interest rate decreased by 1.0% ? Use duration to solve this
question. Briefly explain why an answer derived using duration is slightly different from the
answer when fully repricing the bond. ( 5 marks) 3. GHI Insurance has an obligation of $1.5
million that must be paid 20 years from today. GHI Insurance would like to construct a portfolio
using Bond A and Bond B that will ensure they are able to pay the obligation, regardless of a
change interest rates. Bond A has a 6.0% coupon, paid semi-annualy, and a 30 -year maturity.
Bond B has an 11.0% coupon, paid semi-annualy, and a 10 -year maturity. The discount rate
applicable to both bonds, and to the $1.5 million obligation, is 9.0%. Bond A has a duration of
11.44 years, a face value of $100, and a present value of $69.04. Bond B has a duration of 6.54
years, a face value of $100, and a present value of $113.01. What quantity of Bond A and Bond
B should GHI Insurance purchase? (30 marks) 4. Raj owns zero-coupon bonds with a face value
of $300,000 that will mature in exactly three years from today. Raj has also just started a PhD
program, which he believes will be finished in seven years. Raj would like to buy a house when
he is finished the PhD program, and knows he should invest the proceeds from the zero until
then. He decides to enter into a contract today that will invest the cash until his expected
graduation date. Given the yield curve below, how much will Raj's $300,000 investment be
worth when he graduates? ( 20 marks).
1. activities that includes defining all the work needed to successfu.pdf
1. 1. activities that includes defining all the work needed to successfully meet the project
objectives 2. the characteristics of a project's outcomes and includes work done within its
boundaries decomposition 3. a project artifact that captures, in very broad terms, the outcomes of
the project, including high level project requirements, high-level deliverables 4. occurs when
project team members scope planning add additional features, services, or products to the project
scope without prior approval project scope 5. occurs when the project sponsor or customers add
deliverables without gold plating going through a formal review process
within its boundaries 3. a project artifact that captures, in very broad terms, the outcomes of the
project, including high level project requirements, high-level deliverables 4. occurs when project
team members add additional features, services, or products to the project scope without prior
approval 5. occurs when the project sponsor or customers add deliverables without going through
a formal review process 6. the process of subdividing a complicated deliverable into smaller
deliverables until you reach a product, service, or result that cannot be further subdivided
