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pychu [463]
3 years ago
9

The Bradford Company issued 10% bonds, dated January 1, with a face amount of $80 million on January 1, 2021. The bonds mature o

n December 31, 2030 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31.
Business
1 answer:
DIA [1.3K]3 years ago
5 0

Answer:

I strongly believe that the requirement is to calculate the price of the bond.

The bond is worth $ 70,824,063.03  

Explanation:

It is noteworthy that a rational would-be investor would pay for a bond a price that reflects the cash flows receivable from the bonds in future discounted to today's terms.              

The future cash flows comprise of the semi-annual coupon interest of $4 million(10%/2 *$80 million) for 20 periods as well as the repayment of the principal $80 million at the end of period 20

Since coupon is paid every six months, the coupon would be twenty times over the life of the bond(paid twice a year for 10 years)        

To bring the cash inflows today's term, we multiply them them by the discounting factor 1/(1+r)^N , where is the yield to maturity of 12% and N is the relevant the cash flow is received.          

The discounting is done in attached spreadsheet leading $ 70,824,063.03 present value today.        

Download xlsx
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Brickhouse is expected to pay a dividend of $2.85 and $2.34 over the next two years, respectively. After that, the company is ex
irina1246 [14]

Answer:

The stock price is $31.14

Explanation:

The value of Brickhouse stock today is the present values of future cash flows from the stock discounted using the required rate of return of 10.7% as the discount  rate as done below:

Years               cash flows  discount factor                        Present values

1                            $2.85     1/(1+10.7%)^1=0.903342367        $2.57

2                            $2.34    1/(1+10.7%)^2=0.816027432         $1.91

3 & beyond          *$32.67  1/(1+10.7%)^2=0.816027432         $ 26.66  

                                                             total present values= $31.14

* the year 3 and beyond represents the terminal value of the stock,which is computed using the formula below

=D2*(1+g)/r-g

D2 is the year dividend of $2.34

g is the dividend growth rate of 3.3%

r is the required rate of return which 10.7%

terminal value=$2.34*(1+3.3%)/(10.7%-3.3%)

                        =2.41722 /0.074 =$32.67  

6 0
3 years ago
On March 31, 2017, Alpha Corporation recorded the following factory overhead costs incurred: Factory Manager Salary $7,000 Facto
qaws [65]

Answer:

Explanation:

check the file attached for full explanation

Download docx
7 0
3 years ago
It is estimated that between 1899 and 1924, about 2.1 million italians left the u.s. while almost ____ million arrived.
Semmy [17]
<span>About 3.8 million persons arrived in Italy during the period 1899 and 1924. This amount is far greater that the amount that left during that period.</span>
5 0
3 years ago
why did aig get bailed out while lehman brothers did not? group of answer choices it had a stronger balance sheet lehman brother
GarryVolchara [31]

Because all other big financial corporations would have failed due to the prospect of systemic risk, aig received bailout money while Lehman Brothers did not.

The process of raising money or capital for any form of spending is referred to as finance. It involves directing different sources of funding, such as credit, loans, and investment money, to the businesses that can use them most effectively. The definition of finances according to Finance Box is "The money that people, businesses, or national economies earn and spend." Risk is the potential for bad things to happen, to put it simply. Risk refers to uncertainty on how a certain action will affect or have implications for a human value (such as one's health, well-being, wealth, property, or the environment), frequently focused on unfavourable outcomes.

Learn more about Risk  here

brainly.com/question/17284407

#SPJ4

3 0
1 year ago
Pro forma balance sheet Peabody &amp; Peabody has 2019 sales of $10 million. It wishes to analyze expected performance and finan
zysi [14]

Answer:

Peabody & Peabody

a. Peabody & Peabody

Pro Forma Balance Sheet

December 31, 2021 ($000)

Cash                             480

Marketable securities 200

Accounts receivable 1,440

Inventories                2,160

Total current assets 4,280

Net fixed assets       4,820

Total assets              9,100

Liabilities and Stockholders equity:

Accounts payable          1,680

Accruals                           500

Other current liabilities     80

Total current liabilities 2,260

Long-term debt           2,000

Total liabilities             4,260

Common equity         3,900            

Total liabilities and stockholders’ equity $8,160

Required Finance         940

b. From the statement prepared in part a, it is clear that Peabody & Peabody requires new financing of $940,000 for 2020 to meet the projected assets base.

Explanation:

a) Data and Calculations:

2019 Sales = $10 million

Pro Forma Balance Sheet

December 31, 2017 ($000)

Assets:

Cash                             400

Marketable securities 200

Accounts receivable 1,200

Inventories                1,800

Total current assets 3,600

Net fixed assets       4,000

Total assets              7,600

Liabilities and Stockholders equity:

Accounts payable          1,400

Accruals                           400

Other current liabilities     80

Total current liabilities  1,880

Long-term debt           2,000

Total liabilities              3,880

Common equity           3,720

Total liabilities and stockholders’ equity $7,600

Purpose: To analyze expected performance and financing needs for 2021.

1. Percent of Sales ($12 million)

Accounts receivable, 12%  $1,440

Inventory, 18%                    $2,160

Accounts payable, 14%      $1,680

Net profit margin, 3%          $360

2. Market securities            $200

3. Cash balance (desired minimum) $480

4. Net fixed assets           4,000

New equipment in 2020    650

Depreciation, 2020           (290)

New equipment in 2021    850

Depreciation, 2021            (390)

Net fixed assets            $4,820

5. Accruals                       $500

8. Dividend payout = 50% of $360 = $180

Retained Earnings (current) = $180

Common Equity:

2019    3,720

Income   180 (Retained Earnings)

2020  3,900

5 0
3 years ago
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