Sunland Inc. manufactures cycling equipment. Recently, the vice president of operations of the...
Question:
Sunland 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 $3,088,700 of 7% term corporate bonds on March 1, 2017, due on March 1, 2032, with interest payable each March 1 and September 1. First interest payment will be made on September 1, 2017. At the time of issuance, the market interest rate for similar financial instruments is 12%.
As the controller of the company, determine the selling price of the bonds using standard factor tables. (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 | $ _____ |
Present Value:
Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. There are two basic types of cash flow streams possible: annuity and mixed stream. An annuity is a pattern of equal periodic cash flows, while a mixed stream is a stream of unequal periodic cash flows that reflect no pattern.
Answer and Explanation: 1
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View this answerTo compute for the selling price of the bonds, the present value (PV) of the principal and interest payments must be computed.
PRINCIPAL
{eq}PV =...
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