In: Finance
The purpose of this calculation question is for you to compute the fair value of the financial liabilities of XYZ Company.
XYZ Company has only 1 financial liability. It is a non-callable publicly traded bond. Here are your facts to input into this question:
Required: Compute the fair value of the bond to be reported on this year’s balance sheet. Round to the nearest dollar and do NOT include the dollar sign in your response.
Given
Face value (FV) = $260,000,000
Coupon (Semiannual) = 260000000*5.38%/2
= $6,994,000
Years to maturity = 18
Number of periods = 18*2 = 36
Market interest rate( Semiannual) = 4.30%/2 = 0.0215
Fair value is the present value of the bond
We can calculate present value by using excel PV function:
Fair value = PV(rate,nper,pmt,pv,0)
= PV(0.0215,36,-6994000,-260000000)
= $294,939,142.87
Fair value of the bond to be reported on this year’s balance sheet = 294,939,143