Question

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

Skysong 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 $3,128,500 of 12% 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

$

$54,000 receivable at the end of each period for 8 periods compounded at 11%

Homework Answers

Answer #1

1

Selling price of the bonds 4210466
Workings:
Semi-annual interest 187710 =3128500*12%*6/12
Semi-annual interest rate 4% =8%/2
Number of periods 30 =15*2
Amount PV factor 4% Present value
Semi-annual interest 187710 17.29203 3245887
Principal 3128500 0.30832 964579
Total 4210466
PV factor 4%
Semi-annual interest 17.29203 =(1-(1.04)^-30)/0.04
Principal 0.30832 =1/1.04^30

Question -2

Amount receivable 54000
X PV factor 5.14612 =(1-(1.11)^-8)/0.11
Present value 277890
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Bridgeport Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...
Bridgeport 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 $3,009,100 of 8% 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...
Coronado Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...
Coronado 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 $3,201,000 of 9% 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...
Kingbird Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...
Kingbird 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 $3,454,800 of 11% 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...
Wildhorse Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...
Wildhorse 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 $3,478,400 of 11% 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...
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...
Metlock Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...
Metlock 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 $3409700 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...
Nash Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...
Nash 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 $3,478,400 of 11% 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...
Headland Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...
Headland 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 $3,066,000 of 12% 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...
Autumn Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...
Autumn 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 $1,000,000 of 6% term corporate bonds on March 1, 2018, due on March 1, 2028, with interest payable each March 1 and September 1. At the time of...
Martinez Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...
Martinez 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 $3,054,300 of 12% term corporate bonds on March 1, 2017, due on March 1, 2032, with interest payable each March 1 and September 1, with the first interest...