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SOVA2 [1]
3 years ago
8

One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000. Today,

the market interest rate on these bonds is 5.5%.
What is the current price of the bonds, given that they now have 14 years to maturity?

a) $1,077.01 b) $1,104.62 c) $1,132.95 d) $1,162.00 e) $1,191.79
Business
1 answer:
denis-greek [22]3 years ago
4 0

Answer:

e) $1,191.79

Explanation:

In order to find the price of a bond we need to know the future value of the bond, the interest rate on the bonds, the coupon payments and the time to maturity. In this case the future value of the bond is 1,000, the interest rate is 5.5%, the time to maturity is 14 years and the coupon payments are 7.5% which are (0.075*1,000)=75. Now we input all these values in a financial calculator and compute the present value/price.

FV= 1,000

I=5.5

N=14

PMT= 75

Compute PV=1,191

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Acquisition costs; journal entries
Aleks [24]

Answer:

Journal entries for the transactions are given below

Explanation:

1. Development of new product

                                                               DEBIT     CREDIT

Research and development                 $24,000

Cash                                                                         $24,000

2. Paid the plaintiff for losing patent

                                                                DEBIT     CREDIT

Legal fee (expense)                             $8,000

Cash                                                                         $8,000

3. Bought Equipment and signed non-interest bearing note

                                                                DEBIT     CREDIT

Equipment Cash price                          $37,000

Discount on note payable                    $5,000

Cash paid                                                                  $18,000

Note payable                                                            $24,000

4. Installed sprinkler system

                                                                DEBIT     CREDIT

Sprinkler system                                     $40,000

Cash                                                                         $40,000

5. Plaintiff paid for successful infringement  suit on its patent

                                                                DEBIT     CREDIT

Patent                                                     $24,000

Cash                                                                         $24,000

6. Bought New equipment and traded old one

                                                                DEBIT     CREDIT

New Equipment                                    $13,600

Accumulated depreciation                   $6,800

Loss on sale                                           $3,400

Old Equipment                                                        $13,400

Cash                                                                         $10,400

Working:

Accumulated depreciation = Original Cost - book value

Accumulated depreciation = $13,400 - $6,600

Accumulated depreciation = $6,800                                                      

7 0
3 years ago
The cash flows for a perpetuity continue into the future indefinitely. An example of a perpetuity is: preferred stock. corporate
Svetradugi [14.3K]
The right answer for the question that is being asked and shown above is that: "corporate bonds."The cash flows for a perpetuity continue into the future indefinitely. An example of a perpetuity is: <span>corporate bonds</span>
5 0
3 years ago
A reduction in the number of kanbans (given a constant container size) requires: Group of answer choices an increase in lead tim
Delicious77 [7]

Answer: a reduction in safety stock and/or lead time

Explanation:

Kanban is a visual system that is used for the management of work as the work moves through a process. It should be noted that it is a concept that tells one what to produce, quantity to produce and when to produce it.

A reduction in the number of kanbans (given a constant container size) requires a reduction in safety stock and/or lead time.

7 0
3 years ago
Aerotron Electronics is considering the purchase of a water filtration system to assist in circuit board manufacturing. The syst
tino4ka555 [31]

Answer:

Explanation:

Annual worth: this will be the annuity payment equivalent to all the cashflow of the investment. Thus the PMT of the net present value

Cash Investment at F0: <em>230,000/2 = 115,000</em>

present value of 7,500 salvage value:

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  7,500.00

time   7 years

MARR: 10% = 0.1

\frac{7500}{(1 + 0.1)^{7} } = PV  

PV  <em> 3,848.69 </em>

<u>Then, we need to calculate the present value of the loan discounted at 10%</u>

half the investment is finance: 230,000 / 2 = <em>115,000</em>

Then, this capitalize 2 year at 8% before the first payment:

Principal \: (1+ r)^{time} = Amount

Principal 115,000.00

time 2 year

MARR: 10% = 0.08000

115000 \: (1+ 0.08)^{2} = Amount

Amount 134,136.00

Now we need to discount this loan at 10% which is our rate of return:

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  134,136.00

time   2.00

MARR: 10% = 0.1

\frac{134136}{(1 + 0.1)^{2} } = PV  

PV   <em>110,856.20 </em>

Finally: we add this values to get the resent worth:

<em>115,000 +  110,856.20 - 3,848.69 = </em><em>222,007.51</em>

<em />

Last step, we calculate the PMT of the present worth:

PV \div \frac{1-(1+r)^{-time} }{rate} = C\\

PV 222,007.51

time 7 years

MARR: 10% = 0.1

222007.51 \div \frac{1-(1+0.1)^{-7} }{0.1} = C\\

C  $ 45,601.564

<em />

6 0
3 years ago
In the DuPont Model, return on equity (ROE) is dependent on the firm's:
Anna35 [415]

Answer:

A. Net margins, debt leverage, and asset turnover.

Explanation:

ROE = (Net income / sales) x (sales / total assets) x (total assets / shareholders equity)

I hope my answer helps you

8 0
3 years ago
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