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On January 1, 2018, Pharoah Corporation issued $2,400,000 of 5-year, 9% bonds at 96. The bonds...

On January 1, 2018, Pharoah Corporation issued $2,400,000 of 5-year, 9% bonds at 96. The bonds pay interest annually on January 1. By January 1, 2020, the market rate of interest for bonds of risk similar to those of Pharoah Corporation had risen. As a result, the market value of these bonds was $2,130,000 on January 1, 2020—below their carrying value. Joanna Pharoah, president of the company, suggests repurchasing all of these bonds in the open market at the $2,130,000 price. To do so, the company will have to issue $2,130,000 (face value) of new 10-year, 11% bonds at par. The president asks you, as controller, “What is the feasibility of my proposed repurchase plan?”

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ekkarill92 answered 1 year ago
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