On january 1 2009 carlin corporation issued 2400000 of

Reference no: EM13483299

On January 1, 2009, Carlin Corporation issued $2,400,000 of 5-year, 8% bonds at 95; the bonds pay interest semiannually on July 1 and January 1.

By January 1, 2011, the market rate of interest for bonds of risk similar to those of Carlin Corporation had risen. As a result the market value of these bonds was $2,000,000 on January 1, 2011-below their carrying value.

Andrea Carlin, president of the company, suggests repurchasing all of these bonds in the open market at the $2,000,000 price. To do so the company will have to issue $2,000,000 (face value) of new 10-year, 11% bonds at par. The president asks you, as controller, "What is the feasibility of my proposed repurchase plan?"

Prepare a memo (at least 3 paragraphs) to the president in response to her request for advice. The memo should include;

• A discussion of the economic factors that you believe should be considered for her repurchase proposal. Comment on the relative increase/decrease in interest expense for Carlin Corporation if a new bond issue is made.

• What is the carrying value of the outstanding Carlin Corporation 5-year bonds on January 1, 2011? (Assume straight-line amortization.)
Answers (2) Best answer:

Reference no: EM13483299

Questions Cloud

Pierces profit margin is 5 percent and its payout ratio is : pierce furnishings generated 2.0 million in sales during 2002and its year-end total assets were 1.5 million. also at

Question 30 darth company is considering the purchase of : question 30 darth company is considering the purchase of new heavy construction equipment that will cost 2000000 and

Assume the facts stated in the prior two questions what is : 1. in 2013 rocio invested 30000 in a cattle-feeding partnership that used nonrecourse notes to purchase 100000

Assuming that these ratios will remain constant use the : weatherford industries inc. has the following ratios as0 1.6 ls0 0.4 profit margin 0.10 and dividend payout ratio

On january 1 2009 carlin corporation issued 2400000 of : on january 1 2009 carlin corporation issued 2400000 of 5-year 8 bonds at 95 the bonds pay interest semiannually on july

A department had 600 units which were 40 complete in : a department had 600 units which were 40 complete in beginning goods in process inventory. during the current period

How many palnt stands must be sold to break even if greene : green fingers co. makes small plant stands that sell for 25 each. the companys annual level of production and sales is

A multiperiod project has a positive net present value : 1.in practice dividendsfluctuate more widely than earningstend to be a lower percentage of earnings for mature

If the company expects costs related to the project to be : a manager is considering a special project. corporate policy dictates that all special projects must generate an

User Account

All Pages