Outline one factor that might be helpful about having a clear target market

Gabriele Enterprises has bonds on the market making annual payments, with eleven years to maturity, a par value of $1,000, and s

Angelina_Jolie [31]

Coupon rate on the bonds can be calculated in the following way.

Explanation:

To find the coupon rate of the bond. All we need to do is to set up the bond pricing equation and solve for the coupon payment as follows:

P = $958 = C(PVIFA₆.₄₀%,11) + $1,000(PVIF₆.₄₀%,11)

Solving for the coupon payment, we get:

C = $58.57

The coupon payment is the coupon rate times par value. Using this relationship, we get:

Coupon rate = $58.57/$1,000

Coupon rate = .0586, or 5.86%

Calculator Solution:

Enter 11 6.40 ±$958 $1000

N l/Y PV PMT FV

$58.57

Coupon rate = $58.57/$1,000

Coupon rate = .0586, or 5.86%

7 0

4 years ago

American-based Trenton Inc. has decided to establish a wholly owned subsidiary in Argentina. To decide whether to acquire an ent

mojhsa [17]

Answer:

The benefits of greenfield ventures are:

Investors have larger control over the business they are creating fro scratch rather than acquiring an existing local business.
The investor can avoid intermediary costs.
The investor also has the possibility of setting their own marketing strategies.

Greenfield ventures means that the subsidiary will be built from scratch, which allows the parent company to fully shape its subsidiary as they want.

4 0

3 years ago

On August 4, Rothchild Company purchased on account 12,000 units of raw materials at $14 per unit. During August, raw materials

balandron [24]

Answer and Explanation:

The journal entries are shown below:

On Aug 4

Raw Materials (12,000 units × $14) $168,000

To Accounts Payable 168,000

(Being the raw material purchased is recorded)

For recording this we debited the raw material as it increased the assets and credited the account payable as it also increased the liabilities

On Aug 31

Work in Process Dr $126,800

To Raw materials inventory $126,800

($5,000 × $8) + ($6,200 × $14)

(Being the requisition is recorded)

For recording this we debited the work in process and credited the raw material inventory

4 0

4 years ago

Both Bond Bill and Bond Ted have 10.4 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 ye

AURORKA [14]

Answer:

Ans,

a) If interest rates suddenly rise by 3 percent, Bill´s bond would drop by -20.02% and Ted´s bond would go down by -36.07%

.

b) If rates were to suddenly fall by 3 percent, Bill´s bond would rise by 26.79%

and Ted´s bond would rise too by 86.47%

.

Explanation:

Hi, first let´s go ahead and establish the stable scenario, for that we are going to use the information of the problem but we need to add the discount rate of the bond or yield, which is the missing information. All this so this concept can be explained in a better way, so for this example we´ll say that the yield of both bonds is 10% compounded semi-annually, the same units as the coupon. Now we have to use the following formula.

$Price=\frac{Coupon((1+Yield)^{n}-1) }{Yield(1+Yield)^{n} } +\frac{FaceValue}{(1+Yield)^{n} }$

Where:

Coupon = (%Coupon/2)*FaceValue= (0.104/2)*1,000=52

Yield = we are going to assume 10% annual, that is 5% semi-annual

n = Payment periods (For Bill n=5*2=10, for Ted, n=22*2=44)

So, let´s see what is the price of each bond if the yield was 10% annual compounded semi-annually.

$Price(Bill)=\frac{52((1+0.05)^{10}-1) }{0.05(1+0.05)^{10} } +\frac{1,000}{(1+0.05)^{10} } =1,015.44$

In Ted´s case, that is:

$Price(Ted)=\frac{52((1+0.05)^{44}-1) }{0.05(1+0.05)^{44} } +\frac{1,000}{(1+0.05)^{44} } = 1,035.33$

Now, if the interest rate (Yield) suddenly goes up by 3%, this is what happens to Bill´s Bond

$Price(Bill)=\frac{52((1+0.08)^{10}-1) }{0.08(1+0.08)^{10} } +\frac{1,000}{(1+0.08)^{10} } = 812.12$

If yield goes down by 3%, this is the new price of Bill´s bond.

Price(Bill)=\frac{52((1+0.02)^{10}-1) }{0.02(1+0.02)^{10} } +\frac{1,000}{(1+0.02)^{10} } = 1,287.44

Now, in the case of Ted, this is what happens to the price if the yield goes up.

$Price(Ted)=\frac{52((1+0.08)^{44}-1) }{0.08(1+0.08)^{44} } +\frac{1,000}{(1+0.08)^{44} } = 661.84$

If it goes down by 3%, this would be the price for Ted´s bond.

$Price(Ted)=\frac{52((1+0.02)^{44}-1) }{0.02(1+0.02)^{44} } +\frac{1,000}{(1+0.02)^{44} } = 1,930.56$

Now, in percentage, what we need to use is the following formula.

$Change=\frac{(VariationValue-BaseValue)}{BaseValue} x100$

For example, in the case of Bill´s bond, which yield went up by 3%, this is what we should do.

$Change=\frac{(812.12-1,015.44)}{1,015.44} x100=-20.02Percent$

So, the price variation is -20.02% if the yield rises by 3%.

This are the results of the prices and calculations for you to answer this question. Best of luck.

Bill Ted % (Bill) %(Ted)

Base Price $1,015.44 $1,035.33

(+) 3% Yield $812.12 $661.84 -20.02% -36.07%

(-) 3% Yield $1,287.44 $1,930.56 26.79% 86.47%

5 0

3 years ago

In 2019, Chaya Corporation, an accrual basis, calendar year taxpayer, provided services to clients and earned $25,000. The clien

romanna [79]

Answer:

Accrual shows face amount as revenue

revenue = $25,000

(12,000) (7/36)= $2,333 (regognized in 2017)

Total income reported in 2017 = $27,333

The next year she would show the remainder of 12,000 from 26 month contract

For tax purposes, max of 2 year deferral for payment recieved in advance.

6 0

3 years ago