Prepare the journal entry for the issuance of these bonds. Assume the bonds are issued for cash on January 1, 2017. Garcia Compa
1 answer:
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Answer:
NPV = 1,003,046
Explanation:
NPV = Present value of income - investment
investment 8,000,000
1,490,000 income per year during 8 years at rate x
We need to calculate the WACC so we can know the rate
equity-ratio = 0.40
debt-equity ratio = 0.6
WACC 6.69590%
Now that we achieve the rate we solve for the present value of the cash flow
PV 9,003,046
And finally get the answer
NPV 9,003,046 - 8,000,000 = 1,003,046