On January 1, 2021, Frontier World issues $39.8 million of 8% bonds, due in 15 years,...

On January 1, 2021, Frontier World issues $39.8 million of 8% bonds, due in 15 years, with interest payable semiannually on June 30 and December 31 each year. The proceeds will be used to build a new ride that combines a roller coaster, a water ride, a dark tunnel, and the great smell of outdoor barbeque, all in one ride.

3-a. If the market rate is 9%, calculate the issue price. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Enter your answers in dollars not in millions. Round "Market interest rate" to 1 decimal place. Round your final answers to the nearest whole dollar.)

Required: Calculate Issue Price

Solutions

Expert Solution


Table values are based on:
Face Amount	$ 39,800,000
Interest Payment	$ 1,592,000
Market Interest rate per period	4.50%
Cash Flow	Table Value(PV of 4.5% for 30 period)	Amount	Present Value
PV of Interest	16.28889	$ 1,592,000	$25,931,913
PV of Principal	0.26700	$ 39,800,000	$10,626,600
PV of Bonds Payable(Issue Price)			$36,558,513

Please note that the PV Factors have been rounded off to 5 decimal points as generally the tables provided are also rounded off to 5 decimal point.
But if the table provided to you is different then please take the same

ekkarill92 answered 1 year ago

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