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wariber [46]
3 years ago
11

Due to a number of lawsuits related to toxic wastes, a major chemical manufacturer has recently experienced a market reevaluatio

n. The firm has a bond issue outstanding with 15 years to maturity and a coupon rate of 8 percent, with interest being paid semiannually. The required simple rate of return on this debt has now risen to 16 percent. What is the current value of this bond? (Round the answer to the nearest whole number.)​
Business
1 answer:
8_murik_8 [283]3 years ago
6 0

Answer:

Current value = $550

Explanation:

You can solve this question using a financial calculator. I am using (Texas Instruments BA II plus)

First, since it is Semiannual coupon, adjust the interest rate to semi-annual rate and multiply  15 years by 2 since we have 2 semi annual periods per year.

<em>Note: If using the same calculator as me, key in the numbers first before the function .</em>

Total duration of investment ;N = 15 * 2 = 30

Interest rate; I/Y = 16% / 2 = 8%

Face value; FV = 1000

Semi annual Coupon Payment ; PMT = (8%/2)*1000 = 40

then CPT PV = $549.689

Therefore the current value of this bond is $550 (rounded to whole number.)

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Answer:

The journal entry would be:

Explanation:

Note: Options are missing so providing the journal entry.

The journal entry would be for recording the collection of the note is:

October 30

Cash A/c.........................Dr      $10,150

    Interest Revenue A/c.........Cr     $150

    Notes Receivable A/c.........Cr    $10,000

On October 30, the amount is collected so the any increase in cash is debited. Therefore, cash account is debited. And it is collected against a  notes Receivable  of $10,000 so it leads to decrease in liability, it is credited. Therefore, the notes receivable is credited. And the interest revenue is credited.

5 0
3 years ago
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Answer:

<u>Favourable Changes:</u>

Sales

Gross Profit

Operating Income

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Net Income

<u>Unfavourable Changes:</u>

Cost Of Sales  

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General Expenses

Other Revenue

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Observe Movement from 2018 results to 2019 results

                                        Erie Corp

                   Vertical Analysis of Income Statement

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<u>Less Operating Expenses</u>

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Net Income                                                88                        42

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