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Spiller Corp. plans to issue 12%, 5-year, $460,000 par value bonds payable that pay interest semiannually...

Spiller Corp. plans to issue 12%, 5-year, $460,000 par value bonds payable that pay interest semiannually on June 30 and December 31. The bonds are dated December 31, 2019, and are issued on that date. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "Table value" to 4 decimal places and final answers to nearest whole dollar.) If the market rate of interest for the bonds is 10% on the date of issue, what will be the total cash proceeds from the bond issue?

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Answer #1

Face Value of Bonds = $460,000

Annual Coupon Rate = 12.00%
Semiannual Coupon Rate = 6.00%
Semiannual Coupon = 6.00% * $460,000
Semiannual Coupon = $27,600

Time to Maturity = 5 years
Semiannual Period = 10

Annual Interest Rate = 10.00%
Semiannual Interest Rate = 5.00%

Issue Price of Bonds = $27,600 * PVA of $1 (5.00%, 10) + $460,000 * PV of $1 (5.00%, 10)
Issue Price of Bonds = $27,600 * 7.7217 + $460,000 * 0.6139
Issue Price of Bonds = $495,513

Therefore, total cash proceeds from the bond issue is $495,513

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