Hi guys,
Please help me with this question.
I dont understand and i thought PV >0, but in solution, PV<0.
Thanks
If you are asking why PV is -ve (i.e. PV < 0 ) is because of the calculator understanding/function (idk call it whatever) according to my knowledge the calculator
sees
-ve as cash going out
and
+ve as cash coming in
.
Here we keep PV = -1030.34 because that is the present value we will pay to buy that bond (cash going out ) and FV = 1000 as this is the amount we receive at maturity if we purchased the bond
If you keep both PV & FV +ve or you keep both PV & FV -ve then the calculator will show ERROR 5
I thought when issuing bond, we receive money so it eill be +ve, pay par bond val. is -ve
if you are thinking from the company’s POV then that’s right and you get the same answer if you keep the PMT & FV = -ve to get the right answer
but if you are thinking from an investor prespective then you have to keep the PV= +ve and FV= -ve
An important point to note is that the solution assumes P/Y=C/Y=1. You could also set P/Y=C/Y=2 (2 payments per year and 2 compounding periods per year), which will produce 5.938789 when you CPT I, so there is no need for this x2 business.
I know there are some of you who prefer to always set P/Y=C/Y=1, but some poor slob at TI programmed the calculator just so you could put in any combination of P/Y and C/Y and the calculator would do the grunt calculations!!! 
It’s from the perspective of the bond BUYER. To buy a bond you pay the market price (cash outflow, negative). Later you receive interest PMT (cash inflow, positive) and proceeds at maturity FV (cash inflow, positive)
I wonder why we caculate capital cost for firm based on investor POV
its just the way the calculator is formatted. They had to pick one POV to orient the directions. You’re overthinking it
If i use firm POV, the interest will be different.
I don’t get that sorry.
Firm PoV:
40 N 1030.34 PV -31 PMT -1000 FV CPT I 2.97
All I did was put the appropriate signs on the cash flows. 
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Yes, you are right. I was wrong with sign of PMT.
Thank you.
Cost of capital/WACC are based on market rates, ie what is the rate of return required by the market for it buy/hold the risk of the firm.
It is therefore from an investor’s viewpoint.
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