1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
tatuchka [14]
3 years ago
14

In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures from histori

cal book values to market values. KJM Corporation's balance sheet (book values) as of today is as follows: Long-term debt (bonds, at par) $23,500,000 Preferred stock 2,000,000 Common stock ($10 par) 10,000,000 Retained earnings 4,000,000 Total debt and equity $39,500,000 The bonds have a 7.0% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 11%, so the bonds now sell below par. What is the current market value of the firm's debt? $17,436,237 $17,883,320 $18,330,403 $17,706,000 $17,898,650
Business
1 answer:
Inessa [10]3 years ago
5 0

Answer:

The MV of Debt is $17,883,320.

Explanation:

The answer to this question involves three step process.

Step 1) Calculate the Price of Each Bond

You must have known that when we discount the future cash flows of bond, that is coupon payments and Face value, we get the Price of that Bond. You will get the price of each bond to be $760.99. I have attached an Excel Sheet, it will help you to understand.

Note: Remember to consider YTM and Number of Periods on Semi-Annual Basis because the coupon payments are to be made Semi-Annually.

Step 2) Determine the Number of Bonds

We know that

     Value of Debt (23,500,000) = Par Value (1,000) * Number of Bonds (x)

Rearrange the equation for Number of Bonds and you will get 23,500.

Step 3) Market Value of Debt

Simply multiply the Price of Each Bond with the Number of Bonds and the answer is $17,883,320.

Thanks!

Download xlsx
You might be interested in
. What do you understand by term “advertising”. What would happen if ethical advertisement is not followed by businesses? Explai
Blababa [14]

Answer:

Ethics means a set of moral principles which govern a person’s behavior or how the activity is conducted. And advertising means a mode of communication between a seller and a buyer.

Thus ethics in advertising means a set of well defined principles which govern the ways of communication taking place between the seller and the buyer. Ethics is the most important feature of the advertising industry. Though there are many benefits of advertising but then there are some points which don’t match the ethical norms of advertising.

An ethical ad is the one which doesn’t lie, doesn’t make fake or false claims and is in the limit of decency.

Nowadays, ads are more exaggerated and a lot of puffing is used. It seems like the advertisers lack knowledge of ethical norms and principles. They just don’t understand and are unable to decide what is correct and what is wrong.

The main area of interest for advertisers is to increase their sales, gain more and more customers, and increase the demand for the product by presenting a well decorated, puffed and colorful ad. They claim that their product is the best, having unique qualities than the competitors, more cost effective, and more beneficial. But most of these ads are found to be false, misleading customers and unethical. The best example of these types of ads is the one which shows evening snacks for the kids, they use coloring and gluing to make the product look glossy and attractive to the consumers who are watching the ads on television and convince them to buy the product without giving a second thought.

<em>Ethics in Advertising is directly related to the purpose of advertising and the nature of advertising. Sometimes exaggerating the ad becomes necessary to prove the benefit of the product. For e.g. a sanitary napkin ad which shows that when the napkin was dropped in a river by some girls, the napkin soaked whole water of the river. Thus, the purpose of advertising was only to inform women about the product quality. Obviously, every woman knows that this cannot practically happen but the ad was accepted. This doesn’t show that the ad was unethical. </em>

Ethics also depends on what we believe. If the advertisers make the ads on the belief that the customers will understand, persuade them to think, and then act on their ads, then this will lead to positive results and the ad may not be called unethical. But at the same time, if advertisers believe that they can fool their customers by showing any impractical things like just clicking fingers will make your home or office fully furnished or just buying a lottery ticket will make you a millionaire, then this is not going to work out for them and will be called as unethical.

Recently, the Vetican issued an article which says ads should follow three moral principles - Truthfulness, Social Responsibility and Upholding Human Dignity.

Generally, big companies never lie as they have to prove their points to various ad regulating bodies. Truth is always said but not completely. Sometimes its better not to reveal the whole truth in the ad but at times truth has to be shown for betterment.

Pharmaceutical Advertising - they help creating awareness, but one catchy point here is that the advertisers show what the medicine can cure but never talk about the side effects of that same thing or the risks involved in intake of it.

Children - children are the major sellers of the ads and the product. They have the power to convince the buyers. But when advertisers are using children in their ad, they should remember not to show them alone doing there work on their own like brushing teeth, playing with toys, or infants holding their own milk bottles as everyone knows that no one will leave their kids unattended while doing all these activities. So showing parents also involved in all activities or things being advertised will be more logical.

Alcohol - till today, there hasn’t come any liquor ad which shows anyone drinking the original liquor. They use mineral water and sodas in their advertisements with their brand name. These types of ads are called surrogate ads. These type of ads are totally unethical when liquor ads are totally banned. Even if there are no advertisements for alcohol, people will continue drinking.

Cigarettes and Tobacco - these products should be never advertised as consumption of these things is directly and badly responsible for cancer and other severe health issues. These as are already banned in countries like India, Norway, Thailand, Finland and Singapore.

Ads for social causes - these types of ads are ethical and are accepted by the people. But ads like condoms and contraceptive pills should be limited, as these are sometimes unethical, and are more likely to loose morality and decency at places where there is no educational knowledge about all these products.

(that is same question on my papers)

7 0
2 years ago
Diana is a customer of Apexoria Bank, which is not a member of the FDIC. She currently has a checking account with $11,000 in it
Stella [2.4K]
<span>The answer is A.$0 Since, the Apexoria Bank is not a member of FDIC, no money of Diana is FDIC protected.</span>
7 0
3 years ago
Read 2 more answers
Michelle operates a food truck. Indicate the amount (if any) that she can deduct as an ordinary and necessary business deduction
Snezhnost [94]

Answer:

A. $80

B. $795

C. $0

Explanation:

Only expenses that can be directly attributed to the business are deductible.

Personal expenses will not be deductible.

A. Here the only deductible amount is the legal fees of $80. The speeding will not be charged to the business because it was as a result of personal negligence. The legal fees affect the business because the speeding related to a business asset.

B. Only the amount paid to reserve a spot will be deductible because it relates to expenses for the business to make profit. The money she spent on her children is a personal expense.

C. There is no deductible here. These activities were of a personal nature and in no way related to the operations of the business of operating the food truck.

6 0
3 years ago
You have received a call from a processor that is having quality problems with their pork. They are noticing areas of product lo
const2013 [10]

Answer:

The investigating areas should be field, processing units and finished goods inventory.

Explanation:

The business units should be considered for quality control. The quality of the product is the main cause of concern for any business. When the poor quality products are processed customers will move away from the business. Total Quality Management or TQM approach is used to make the products best fit.

6 0
3 years ago
A common feature of skiing is waiting in lift lines.
pychu [463]

Answer:

The price should be increased to achieve a balance between supply and demand.

Explanation:

If visitors have to wait long for lift, this suggests that the demand is not matching the supply. In fact demand seems to be higher than supply which causes long wait for lift. An increase in price will cause the demand to fall and hence the supply will meet the demand and would result in less waiting for lifts.

4 0
3 years ago
Other questions:
  • A large manufacturing business has hired you as a fraud detection specialist. The first day on the job your boss tells you she h
    11·1 answer
  • Which of the following is generally true about a a savings vehicle?
    12·1 answer
  • Cushenberry Corporation had the following transactions.1. Sold land (cost $11,360) for $14,200.2. Issued common stock at par for
    15·1 answer
  • Which of the following describes a situation in which there would be decreasing marginal utility?
    10·2 answers
  • ABC Medical Technology, a fast-growing global research firm, has accumulated so much client information that conventional databa
    5·1 answer
  • Economists make assumptions to represent their political bias. focus their thinking. make models easier for students to understa
    15·1 answer
  • Your boss has purchased a new laptop for business use and has asked you to make sure the data he plans to store on the laptop is
    14·1 answer
  • XYZ Equipment, a firm that produces manufacturing equipment for various industries, experiences an influx of new sales employees
    15·1 answer
  • Which of the following results in positive benefits to individuals, the group, or the organization? a. Functional conflict b. Em
    10·2 answers
  • During year 1 meriwerher construction company started a construction job with a contract price 3,000,000 the job was completed i
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!