How much of the company profit should be placed in the bank

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Reference no: EM131600425

You are the financial planner for Johnson Controls. Assume last year's profits were $700,000. The board of directors decided to forgo dividends to stockholders and retire high-interest outstanding bonds that were issued 5 years ago at a face value of $1, 250,000. You have been asked to invest the profits in a bank. The board must know how much money you will need from the profits earned to retire the bonds in 10 years. Bank A pays 6% compounded quarterly, and Bank B pays 6 1/2 % compounded annually. Which bank would you recommend, and how much of the company's profit should be placed in the bank? If you recommended that the remaining money not be distributed to stockholders but be placed in Bank B, how much would the remaining money be worth in 10 years? Use tables in the Business Math Handbook. Round final answer to nearest dollar. LU 12-1(2, 3), LU 12-2(2)

Reference no: EM131600425

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