Question

In: Accounting

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

Ivanhoe 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, 2017, due on March 1, 2032, with interest payable each March 1 and September 1, with the first interest payment on September 1st, 2017. At the time of issuance, the market interest rate for similar financial instruments is 12%.

1) 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.) What is the selling price of the bonds?

Solutions

Expert Solution

Present Value of Interest payment= (3478400*12%/2)*(PVAF 30years@6%)

                                                                                 =208704*13.76483=$2872775.08

Present Value of Principal=3478400*(PVF 30th year @6%)

                                                  = $3478400*0.17411=605624.22

Therefore Selling Price=$2872775.08 + $605624.22=$3478399.30=$3478399 (Rounded Off)

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

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 $3,492,700 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...
Monty Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested...
Monty 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 $3,258,500 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...
Skysong Inc. manufactures cycling equipment. Recently, the company’s vice-president of operations has requested construction of a...
Skysong Inc. manufactures cycling equipment. Recently, the company’s vice-president of operations 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 $2,250,000 of 9% term corporate bonds on March 1, 2020, due on March 1, 2034, with interest payable each March 1 and September 1. At the time of issuance, the market...
Metlock Inc. manufactures cycling equipment. Recently, the company’s vice-president of operations has requested construction of a...
Metlock Inc. manufactures cycling equipment. Recently, the company’s vice-president of operations 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 $2,380,000 of 13% term corporate bonds on March 1, 2020, due on March 1, 2034, with interest payable each March 1 and September 1. At the time of issuance, the market...
1.a Sheridan Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has...
1.a Sheridan 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 14% term corporate bonds on March 1, 2020, due on March 1, 2035, with interest payable each March 1 and September 1, with the first...
Katharine Rally is the vice president of operations for the ZUSH Company. She oversees operations at...
Katharine Rally is the vice president of operations for the ZUSH Company. She oversees operations at a plant that manufactures components for hydraulic systems. Katharine is concerned about the plant’s present production capability. She has reduced the decision situation to three alternatives. The first alternative, which is fully automation, would result in significant changes in present operations. The second alternative, which is semi- automation, involves fewer changes in present operations. The third alternative is to make no changes (do nothing)....
Katharine Rally is the vice president of operations for the XYZ Company. She oversees operations at...
Katharine Rally is the vice president of operations for the XYZ Company. She oversees operations at a plant that manufactures components for hydraulic systems. Katharine is concerned about the plant’s present production capability. She has reduced the decision situation to three alternatives. The first alternative, which is fully automation, would result in significant changes in present operations. The second alternative, which is semi-automation, involves fewer changes in present operations. The third alternative is to make no changes (do nothing). As...
You are the Vice President of Operations for Willowbrook Company, a decentralized company that makes several...
You are the Vice President of Operations for Willowbrook Company, a decentralized company that makes several varieties of drinks (soft drinks, cider-based drinks, and coffee drinks). Each division is run as an investment center with the manager’s performance evaluation based on their division’s ROI. In addition to the information below, there are $320,000 in corporate costs, of which $190,000 are allocated to the divisions based on the number of units sold at each division. These costs are due to employee...
You are the Vice President of Operations for Willowbrook Company, a decentralized company that makes several...
You are the Vice President of Operations for Willowbrook Company, a decentralized company that makes several varieties of drinks, making soft drinks, cider-based drinks, and coffee drinks. Each division is run as an investment center with the manager’s performance evaluation based on their division’s ROI. In addition to the information below, there are $320,000 in corporate costs, of which $190,000 are allocated to the divisions based on the number of units sold at each division. These costs are due to...
The vice president at your company, Columbia Holdings, has given you a new assignment: “Recently I...
The vice president at your company, Columbia Holdings, has given you a new assignment: “Recently I asked the folks at Patterson Manufacturing to develop a strategy for improving their profitability. They have responded with a proposal. I want you to evaluate the proposal: Is it viable? Is it sustainable? Visit their operations and bring back a recommendation.” As you travel to the site you review a brief history of the firm. Patterson Manufacturing was founded in a small northeastern city...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT