Present Value of Bonds Payable; Premium exhibit 4 http://cxp.cengage.com/content
ID: 2459854 • Letter: P
Question
Present Value of Bonds Payable; Premium
exhibit 4
http://cxp.cengage.com/contentservice/assets/T=1459709820274/waac26h/images/ch14/waac25h_ch14_exhibit4.gif
exhibit 5
http://cxp.cengage.com/contentservice/assets/T=1459709820274/waac26h/images/ch14/waac25h_ch14_exhibit5.gif
Present Value of Bonds Payable; Premium Mason Co. issued $530,000 of five-year, 13% bonds with interest payable semiannually, at a market (effective) interest rate of 12%. Determine the present value of the bonds payable, using the present value tables in Exhibit 4 and Exhibit 5. Round to the nearest dollar.Explanation / Answer
PV of Bonds Payable = 530,000*.55839 + 34,450*7.36009 PV of Bonds Payable = 295,946.70+ 253,555.10 PV of Bonds Payable = $549,501.80 OR Statemnet showing Price or Intrinsic Value Particulars Time PVf @6% Amount PV Cash Flows (Interest) = 530,000*13%/2 0.50 0.94340 34,450.00 32,500.00 Cash Flows (Interest) = 530,000*13%/2 1.00 0.89000 34,450.00 30,660.38 Cash Flows (Interest) = 530,000*13%/2 1.50 0.83962 34,450.00 28,924.88 Cash Flows (Interest) = 530,000*13%/2 2.00 0.79209 34,450.00 27,287.63 Cash Flows (Interest) = 530,000*13%/2 2.50 0.74726 34,450.00 25,743.04 Cash Flows (Interest) = 530,000*13%/2 3.00 0.70496 34,450.00 24,285.89 Cash Flows (Interest) = 530,000*13%/2 3.50 0.66506 34,450.00 22,911.22 Cash Flows (Interest) = 530,000*13%/2 4.00 0.62741 34,450.00 21,614.36 Cash Flows (Interest) = 530,000*13%/2 4.50 0.59190 34,450.00 20,390.90 Cash Flows (Interest) = 530,000*13%/2 5.00 0.55839 34,450.00 19,236.70 Cash flows (Maturity Amount) 5.00 0.55839 530,000.00 295,949.23 Intrinsic Value of Bond or Current Bond Price 549,504.23
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