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xenn [34]
3 years ago
12

TravelEasy Inc. has issued 30-year semiannual coupon bonds with a face value of $1,000. If the annual coupon rate is 14% and the

current yield to maturity is 8%, what is the firm's current price per bond?
Business
1 answer:
rosijanka [135]3 years ago
5 0

Answer:

Coupon (R) = 14% x $1,000 = $140

Bond yield (kd) = 8% = 0.08

No of years (n) = 30 years

No of compounding periods (m) = 2

Po= R/m(1-(1+Kd/m)-nm/Kd/m + FV/(1+Kd/m)nm

Po = $140/2<u>(1-(1+0.08/2)</u>-30x2 + 1,000(1+0.08/2)30x2

                         0.08/2

Po = $70<u>(1-(1+0.04)</u>-60 + 1,000/(1 + 0.04)60

                       0.04

Po = $70<u>(1-(1.04)</u>-60 + 1,000/(1.04)60

                 0.04

Po = 70(22.6235) + 95.06

Po = $1,678.71

Explanation:

The price of a bond is equal to the present value of coupon plus the present value of the face value.

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Mary purchased a home in year 1 for $200,000. She made a 20-percent down payment and financed the rest with a 15 year loan at si
Serjik [45]

Answer:

If Mary decides to itemize her deductions, she can deduct $11,000 from her gross income (= $9,600 + $1,400).

Explanation:

For 2019, Mary can deduct mortgage interests from her first loan and the interests from her home equity loan as itemized deductions. Deductions are available for mortgage debt and other home equity loans up to $500,000 for single filers and $1,000,000 for married joint filers.

8 0
2 years ago
Ray is a shareholder of Small Biz Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by S
julsineya [31]

Ray is a shareholder of a small company. When the director falls to undertake an action it falls under derivative suit.

Explanation:

  • Derivative suit is referred to as a law suit that is brought by the shareholder in behalf of the company against the third party.
  • If in a company the employees, the directors as well as the officers are not ready to file a complain against the third party then the shareholder has the right to file a complaint against the third party.
  • Derivative suit is normally filed by the shareholder when there is a mismanagement in the company. To stop the illegal work this action is being taken.  
4 0
3 years ago
Davison Toaster Corp. sells its products for $250 per unit. It has the following costs:
dolphi86 [110]

Answer:

Break-even point in units= 1,860

Explanation:

Giving the following information:

Selling price= $250 per uni

Fixed costs= 109,900 + 290,000= $399,900

Unitary variable cost= 29 + 6= $35

<u>To calculate the break-even point in units, we need to use the following formula:</u>

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 399,900 / (250 - 35)

Break-even point in units= 1,860

7 0
3 years ago
The management of Retz Corporation is considering the purchase of a new machine costing $500,000. The company's desired rate of
kirill [66]

Answer:

The present value index is 0.91 which is less than 1. So, the investment should not be accepted.

Explanation:

Present Value Index : It shows the ratio between the sum of present value of all years cash inflows after applying the discount rate and initial investment.

In mathematically,

Present value index = Sum of present value of all years cash flows with discount rate ÷ Initial Investment

where,

Present value = Net cash flow × Discount rate

So,

Year 1 = $180,000 × 0.909 = $163,620

Year 2 = $120,000 × 0.826 = $99,120

Year 3 = $100,000 × 0.751 = $75,100

Year 4 = $90,000 × 0.683 = $61,470

Year 5 = $90,000 × 0.621 = $55,890

Now, Sum all the yearly cash inflows which equals to

= $163,620 + $99,120 + $75,100 + $61,470 + $55,890

= $455,200

So, the present value index = $455,200 ÷ $500,000 = 0.91

Hence, the present value index is 0.91 which is less than 1. So, the investment should not be accepted.

5 0
3 years ago
Engineworks Co. provides the following fixed budget data for the year: Sales (20,000 units) ……………………………. ​ $600,000 Cost of sale
marysya [2.9K]

Answer:

Flexible Contribution Margin <u>147,000</u>

<u>Actual </u>Contribution Margin <u>139,000</u>

<u>Variance 8000 unfavorable</u>

Explanation:

Engine Works Company

Flexible Budget Performance Report

For the year using the Contribution Margin Format

                                      Actual                      Static                Flexible

                                    (21,000 units)       (20,000 units)     (21,000 units)

Sales                       …$651,000                 $600,00             630,000 Fav

V. Cost of goods sold: ​ ​ 512,000              $ 460,000           483,000 Unfav

Direct materials .$231,000 ​                     $200,000             210,000

Direct labor   168,000 ​                              160,000               168,000

Variable overhead  73,500 ​                       60,000               63,000

Variable Operating Expenses 39,500       40,000             42,000

<u>Contribution Margin    $139,000                140,000          147,000  Unfav</u>

Fixed Expenses

Fixed Operating Expenses 12,000 ​ 12000           12000

Fixed overhead 77,500           80,000                  84,000

<u>Income from operations  ​ $ 49,500    $ 48,000            $51,000  Fav</u>

<u></u>

<u>Working</u>

Flexible Calculations = (600,000/20,000)*21,000= $ 630,000

V. Cost of goods sold= ($ 460,000 /20,000)*21,000= 483,000

Direct materials .   =  $200,000 /20,000)*21,000=   210,000

Direct labor =    160,000/20,000)*21,000=    168,000

Variable overhead  =  60,000 /20,000)*21,000=    63,000

Variable Operating Expenses =  40,000 /20,000)*21,000= 42,000

All calculations are carried out in the same way. Dividing the amount in the given budget with the number of units and multiplying it with actual number of units.

Flexible Contribution Margin 147,000 and Actual Contribution Margin 139,000 which shows a Variance  of 8000  which is unfavorable.

4 0
2 years ago
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