INVESTOR Corp. was interested in investing in bonds and, on 01/01/2012 purchased 8% bonds dated January 1, 2012. These bonds had
a face amount of $10 million, pay interest on 06/30 and 12/31, and mature in 10 years. For bonds of similar risk and maturity, the market yield is 6%. INVESTOR Corp. uses the effective interest method. 1. Prepare INVESTOR Corp.’s entry to record the bond purchase? 2. Prepare INVESTOR Corp.’s entry on 06/30/2012 and on 12/31/2012 to record interest?
1 answer:
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Answer:
To make it feasible it will need to operate 7 or more planes.
Explanation:
450,000 maintenance facility
useful life of 15 year
salvage value of 100,000
<u>saving cost per plane:</u>
third party cost - own facility cost = cost savings
35,000 - 25,000 = 10,000
present value of the salvage value: (present value of a lump sum)
salvage $ 100,000
time 15 years
Minimum accepter rate of return: 0.12000
PV 18,269.6261
present worth of the facility:
450,000- 18,268.63 = 431,731.37
Now we determinate the PMT over a 15 years period to know the cost savings per year to justify the facility:
PV 431,731
time 15
rate 0.12
C $ 63,388.630
As each plane cost savings are 10,000
63,388.62 / 10,000 = 6.39
the company will need to operate 7 or more planes.