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Mariana [72]
3 years ago
6

Lopez Plastics Co. (LPC) issued callable bonds on January 1, 2021. LPC's accountant has projected the following amortization sch

edule from issuance until maturity:
Date Cash Effective Decrease in Outstanding
interest interest balance balance
1/1/2021 $207,020
6/30/2021 $7,000 $6,211 $789 206,230
12/31/2021 7,000 6,187 813 205,417
6/30/2022 7,000 6,163 837 204,580
12/31/2022 7,000 6,137 863 203,717
6/30/2023 7,000 6,112 888 202,829
12/31/2023 7,000 6,085 915 201,913
6/30/2024 7,000 6,057 943 200,971
12/31/2024 7,000 6,029 971 200,000
What is the annual stated interest rate on the bonds?
a. 3.5%
b. 6%
c. 7%
d. none of the above
Business
1 answer:
Kobotan [32]3 years ago
6 0

Answer:

c. 7%

Explanation:

According to the given scenario, the computation of the annual stated interest rate on the bonds is shown below:-

Sated interest Rate = Cash interest ÷ Face Value of the bond × 2

= $7,000÷ $200,000 × 2

= 7%

Therefore for computing the annual stated interest rate on the bonds we simply applied the above formula. hence the correct option is c

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adelina 88 [10]

Answer:

e. $6.0 million

Explanation:

The computation of the total value of the firm is shown below:

The Value of the firm is

= Amount borrowed ÷ ownership percentage

= $1,500,000 ÷ 0.25

= $6,000,000

Hence, the total value of the firm is $6,000,000

Therefore the correct option is e.

We simply applied the above formula so that the correct value could come

And, the same is to be considered  

4 0
3 years ago
Lohn Corporation is expected to pay the following dividends over the next four years: $18, $14, $13, and $7.50. Afterward, the c
Lerok [7]

Answer:

current share price = $85.96

Explanation:

Find the PV of each dividend

PV= FV / (1+r)^t

r= required return

t= total duration

PV(D1) = 18 / (1.14)= 15.78947

PV(D2) = 14 / (1.14^2) = 10.77255

PV(D3) = 13 / (1.14^3) = 8.774630

PV(D4) = 7.50 / (1.14^4) = 4.44060

PV(D5 onwards) is a two-step process, first PV of growing perpetuity;

PV(D5 onwards) at yr4 =[7.50*(1+0.04) ] / (0.14-0.04) = 78

second, finding PV today ; PV(D5 onwards) at yr 0 = 78 / (1.14^4) = 46.18226

Add the PVs to get the current share price = $85.96

4 0
3 years ago
Brenda wants to buy a new car and has a budget of $25,000. she has just found a magazine that assigns each car an index for styl
IgorC [24]
For each $5000 she spends on the style the record ascends by one, so the most she can accomplish is an auto with style list of 5. For each $2500 she spends on gas mileage the file ascends by one, so the most she can accomplish is an auto with a gas-mileage file of 10. The slant of her spending line is in this way ½.
6 0
3 years ago
Consumers and businesses are able to purchase from governments and private companies, which are debt certificates. Investors can
Assoli18 [71]

Answer:

True

Explanation:

Debt certificate is a written agreement of purchasing a bond from a private company or government, it gives information regarding the maturity date, face value and principal amount. They are normally issued to consumers and business, but investors can also buy bonds or debt certificate by buying the right to loans and mortgages, it allows them to buy debt certificates.

5 0
3 years ago
You have just won a contest where the prize is either a new motorcycle, with an MSRP of $30000, or $20000 in cash. You do not ha
Vilka [71]

Answer: The motorcycle because you can sell it for more cash than the cash prize option. Value = $25000 (the price you can sell it for.)

Explanation:

Based on the scenario in the question, we've been given three options which are a new motorcycle, with an MSRP of $30000, or $20000 in cash.

The manufacturer's suggested retail price (MSRP) is simply the price that the producer of a product recommends ifor the product to be sold in retail stores.

Based on the scenario, the best option will be to choose the motorcycle. This is because it can sold for an amount that is not than the cash prize option of $20,000 since the motorcycle is valued at $25000.

4 0
3 years ago
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