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On January 1, 2013, Shay issues $380,000 of 9%, 15-year bonds at a price of 97.25. Six years later, on January 1, 2019, Shay retires 30% of these bonds by buying them on the open market at 105.25. All interest is accounted for and paid through December 31, 2018, the day before the purchase. The straight-line method is used to amortize any bond discount. 1. How much does the company receive when it issues the bonds on January 1 2013? 2. What was the amount of the discount on the bonds at January 1, 2013? 3. How much amortization of the discount is recorded on the bonds for the entire period from January 1, 2013, through December 31, 2018? 4. What is the carrying book value of the bonds and the carrying value of the 30% soon-to-be-retired bonds as of the close of business on December 31, 2018? 5. How much did the company pay on January 1, 2019, to purchase the bonds that it retired? 6. What is the amount of the recorded gain or loss from retiring the bonds? 7. Prepare the journal entry to record the bond retirement at January 1, 2019.
A project has the following estimated data: price = $66 per unit; variable costs = $43 per unit; fixed costs = $16,500; required return = 8 percent; initial investment = $25,000; life = five years. Ignoring the effect of taxes, the accounting break-e..
A bond with a 12 percent quarterly coupon rate has a yield to maturity of 16 percent. The bond has a par value of $1,000 and matures in 20 years. Based on this information, what is a fair price of this bond?
Two processes can be used for producing a polymer that reduces friction loss in engines. Process T will have a first cost of $750,000, an operating cost of $60,000 per year, and a salvage value of $80,000 after its 2-year life. Which process should b..
Basil Herb Co. is expected to pay $2.20 per share in dividends at the end of the next 12 months. The growth rate in dividends is expected to be constant at 6% per year. If the stock is selling for $55 per share, what is the required rate of return?
Biopharma is a pharmaceutical company. Biopharma’s annual stock returns have a CAPM beta of 1.25 (i.e. β =1.25). The market portfolio’s return is 13%, and the riskfree rate is 5%. a. What is the required expected return for Biopharma according to the..
Mad Golf Inc., a successful C corporation, has three shareholders: Larry, Brice and Joe. All the shareholders are in their early fifties. The company has a redemption buy-sell agreement funded with corporate-owned life insurance. If a shareholder die..
Short term debt tends to be more expensive than long term debt. Low levels of inventory lead to higher profit margins. Maturity matching is generally considered to be an aggressive financing policy.
Counts Accounting has a beta of 1.20. The tax rate is 40%, and Counts is financed with 45% debt. What is Counts' unlevered beta? Round your answer to two decimal places.
Today is a day in May 2525 and a bond with an coupon rate of 8.0% just yesterday paid a coupon. The bond matures in November 2540 and its quoted bond price is 118.03 percent of par (semi annual compounding). Find the yield to maturity (YTM) and curre..
Discuss basic economic data, how to access it and how it can be used to make decisions and plan for the future.
Assume that a new project will annually generate revenues of 1,800,000 and cash expenses (including both fixed and variable costs) of 600,000 while increasing depreciation by 190,000 per year. In addition, the firm’s tax rate is 37%. Calculate the op..
A proposed project requires an initial investment of $8,500 in current assets, 75% of which will be financed with accounts payable. The project will have:
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