Question

# Crane Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...

Crane Inc. manufactures cycling 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 bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing \$3,205,500 of 10% term corporate bonds on March 1, 2020, due on March 1, 2035, with interest payable each March 1 and September 1, with the first interest payment on September 1st, 2020. At the time of issuance, the market interest rate for similar financial instruments is 8%.

As the controller of the company, determine the selling price of the bonds. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

 Selling price of the bonds \$enter the Selling price of the bonds in dollars rounded to 0 decimal places

 Selling price of the bonds 3759800
 Workings: Semi-annual interest 160275 =3205500*10%*6/12 Semi-annual interest rate 4% Number of periods 30 =15*2 Amount PV factor 4% Present value Semi-annual interest 160275 17.29203 2771480 Principal 3205500 0.30832 988320 Total 3759800 PV factor 4% Semi-annual interest 17.29203 =(1-(1.04)^-30)/0.04 Principal 0.30832 =1/1.04^30

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