On January 1, a company issues 8%. 5 year, $300,000 bonds that pay interest semiannually. On the issue date, the annual market r
ate of interest is 6%. The following information is taken from present value tables:
Present value of an annuity for 10 periods at 3% 8.5302
Present value of an annuity for 10 periods at 4% 8.1109
Present value of 1 due in 10 periods at 3% 0.7441
Present value of 1 due in 10 periods at 4% 0.6756
What is the issue (selling) price of the bond?
a.$420,000
b.$402,362
c.$300,010
d.$308,107
e.$325,592
Present value of an annuity for 10 periods at 3% 8.5302
Present value of an annuity for 10 periods at 4% 8.1109
Present value of 1 due in 10 periods at 3% 0.7441
Present value of 1 due in 10 periods at 4% 0.6756
What is the issue (selling) price of the bond?
a.$420,000
b.$402,362
c.$300,010
d.$308,107
e.$325,592
1 answer:
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Answer:
The appropriate solution is "$130,000".
Explanation:
The given values are:
No. of common shares outstanding
= 50,000
Dividend per share
= $1.80
No. of preferred shares outstanding
= 8,000
Dividend per share
= $5
Now,
The total dividend on common shares will be:
=
On substituting the values, we get
=
= ($)
The total dividend on preferred stock will be:
=
On substituting the values, we get
=
= ($)
Hence,
The total dividend paid by company will be:
=
=
= ($)
Thus the above is the correct answer.