Question

Waltman Company manufactures exercise equipment. Recently the vice president of operations of the company has requested...

Waltman Company manufactures exercise equipment. Recently the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company's exercise equipment. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing \$3150000 of 15% bonds on March 1, 2020, due on March 1, 2035, with interest payable each March 1 and September 1. At the time of issuance, the market interest rate for similar financial instruments is 14%. What is the selling price of the bonds? (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

 Bond Selling Price \$3,345,587 Working Bond Price formula =C*[1-[1/(1+i)n]/i+M/(1+i)n Bond Selling Price = 236250*(1-1/(1+0.07)^30)/0.07+3150000/(1+0.07)^30 = 3,345,587 = 2,933,808+ 411,779 C= (3,150,000*15%)/2 = 236,250 M= 3,150,000 i 14% Half yearly 7% n 15*2=30

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