In: Accounting
rief Exercise A-14 Dempsey Railroad Co. is about to issue $288,000 of 10-year bonds paying an 9% interest rate, with interest payable semiannually. The discount rate for such securities is 10%. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) In this case, how much can Dempsey expect to receive from the sale of these bonds? (Round answer to 0 decimal places, e.g. 2,525.) Dempsey can expect to receive $
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 Bonds issue price is calculated by ADDING the:  | 
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 Discounted face value of bonds payable at market rate of interest, and  | 
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 Discounted Interest payments amount (during the lifetime) at market rate of interest.  | 
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 Annual Rate  | 
 Applicable rate [since semi annual payments]  | 
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 Market Rate  | 
 10.0%  | 
 5.0%  | 
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 Coupon Rate  | 
 9.0%  | 
 4.5%  | 
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 Face Value  | 
 $ 288,000.00  | 
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 Term (in years)  | 
 10  | 
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 Total no. of interest payments  | 
 20  | 
PV of $1 factor table of 5% for 20th period, AND
PV of Annuity of $1 factor table of 5% for 20th period.
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 Amount  | 
 PV factor/PV Annuity factor [LOOK the values under your factor table]  | 
 Present Values  | 
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 PV of Face Value of  | 
 $ 288,000.00  | 
 0.37689  | 
 $ 108,544  | 
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 PV of Interest payments of  | 
 $ 12,960.00 [288000 x 9% x 6/12]  | 
 12.46222  | 
 $ 161,510  | 
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 Issue Price of Bonds  | 
 $ 270,054 [or $ 270,055 depending on your factor table value]  | 
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