Explaining with my reasoning and my calculation

The low the discount rate the higher the present value and the higher the discount rate the low the present value

This implies that when the discount is high the decrease in amount to be paid on gold mine is high therefore the investor will need to pay less amount of buying price hence low amount of present value is required

Also when discount rate is low there is less decrease in amount to be paid for gold therefore requiring high amount to be paid therefore high amount of present value

C.    If I believed that interest rates and inflation were going to go up during the next two years inflation reduces purchasing power of money it leads to cost of input such as labor and row materials and output to be high it has eventually impact on cash flow and affect operating cost of project on the other hand/ interest rate increase the cost of borrowing money. If the aggregate demand for loanable fund increases without a corresponding increase in aggregate supply there will be shortage of loanable fund and interest rate will rise until an additional supply of loanable fund is available to accommodate the excess demand

The price of gold mine would go down because the purchasing power of customer would go down

D.          If goldmine was located in an unstable region rather than the us potential buyers will pay less money because the prices will not be fixed and each seller will set his or her own price and buyer will prefer the lowest price because the low the price of commodity the higher the demand and the low the demand

Part II

Minnesota mining & manufacturing co. founded in 1902 has a good production and supply chain after a period of time struggling. It has a variety of products.

It has offered innovative and practical solutions. Its mission is to reduce risk and maintain employees in the business environment. It creates employee awareness and intelligence and understanding of themselves. Its statistics shows that it has $ 21.2b sales, operating income of $5.0b

It has 35 business units operating in more than 60 countries. 3M ranks 111 out of 500 global companies and 51 out of 500 companies in the US. She has acquired Delivery management solutions. The company sells pharmaceuticals to Grace Way pharmaceuticals and acquired CUNO in 2005 in an all cash merger. The subscribers had reached 8.8 million in 2005.

In 2006, Netflix continued its rapid growth and revenue went up to 46% from $997million in 2005.

I would pay a higher price for Netflix bonds because it has a higher growth and revenue is going up by 46%. It also has a large number of subscribers than 3M bonds.

Netflix offers lower discount rates making the revenue generated to be high because the selling price of the bond is high.

Netflix is high risk high return bond because large amounts are invested in bonds which are more risky. When price is favorable and has more sales, the return is also high leading to rapid growth in revenue.

Inflation reduces purchasing power of money. When the price of the bond is high and demand for bond is also high, there will be people willing to buy bonds at high price and the supply of bond is low leading to inflation.

Bonds with high interest rates will make borrowers pay high amount of money for the amount borrowed. Therefore, borrowers would prefer bonds with low interest rates and avoid high interest rate bonds.


C. Hall wood, R. Mc Donald; International Money and Finance; Blackwell Pub, 2000