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suter [353]
2 years ago
6

Big Ed's Electrical has a pure discount bond that comes due in one year and has a face value of $1,000. The risk-free rate of re

turn is 4 percent. The assets of Big Ed's are expected to be worth either $800 or $1,300 in one year. Currently, these assets are worth $1,140. What is the current value of the debt of Big Ed's Electrical?
a) $222.46
b) $370.77
c) $514.28
d) $769.23
e) $917.54
Business
1 answer:
Ivahew [28]2 years ago
8 0

Answer: $917.54

Explanation:

The current value of the debt of Big Ed's Electrical will be calculated thus:

First, we will calculate the present value which will be:

= $800 / (1 + 4%)

= $800 / ( 1 + 0.04)

= 800 / 1.04

= $769.23

The number of options that are needed

will be:

= (1300 - 800) / ( 300 - 0)

= 500 / 300

= 1.6667

Therefore,

1140 = ( number of option needed × Co) + Present value

1140 = (1.6667 × Co ) + 769.23

Co = (1140 - 769.23 ) / 1.6667

Co = 370.77 / 1.6667

Co = $222.46

Value of debt will now be:

= Current worth of assets - Co

= 1140 - 222.46

= 917.54

Therefore, the answer is $917.54

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True or false: An EAP only contains information on what happens during an emergency.
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A new building that costs $1,400,000 has a useful life of 10 years and a scrap value of $100,000. Using straight-line depreciati
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Answer:

V = $1,400,000 - $130,000t

Explanation:

Data provided in the question:

Cost of the new building = $1,400,000

Useful life = 10 years

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using the straight line method

Annual depreciation = [ Cost - Scrap value ] ÷ Useful life

= [$1,400,000 - $100,000 ] ÷ 10

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4 0
3 years ago
Global Marine obtained a charter from the state in January that authorized 1,000,000 shares of common stock, $5 par value. Durin
hjlf

Answer:

Global Marine

a. Indication of the accounts and amounts for each transaction:

a. Cash $5,500,000 Common stock $500,000 Additional Paid-in Capital $5,000,000

b. Treasury stock $125,000 Additional Paid-in Capital $1,125,000 Cash $1,250,000

c. Cash $510,000 Treasury stock $50,000 Additional Paid-in Capital $460,000

d. Cash $490,000 Treasury stock $50,000 Additional Paid-in Capital $440,000

b. Journal Entries:

a. Debit Cash $5,500,000

Credit Common stock $500,000

Credit Additional Paid-in Capital $5,000,000

To record the issuance of 100,000 shares of the common stock at $55 cash per share.

b. Debit Treasury stock $125,000

Debit Additional Paid-in Capital $1,125,000

Credit Cash $1,250,000

To record the repurchase of 25,000 shares at $50 cash per share.

c. Debit Cash $510,000

Credit Treasury stock $50,000

Credit Additional Paid-in Capital $460,000

To record the re-issuance of 10,000 shares from treasury for $51 per share.

d. Debit Cash $490,000

Credit Treasury stock $50,000

Credit Additional Paid-in Capital $440,000

To record the re-issuance of 10,000 shares from treasury for $49 per share.

Explanation:

a) Data and Calculations:

Authorized common stock shares, 1,000,000 at $5 par value

Net income earned during the year = $400,000

Selected transactions:

a. Cash $5,500,000 Common stock $500,000 Additional Paid-in Capital $5,000,000

100,000 shares of the common stock at $55 cash per share.

b. Treasury stock $125,000 Additional Paid-in Capital $1,125,000 Cash $1,250,000

25,000 shares at $50 cash per share.

c. Cash $510,000 Treasury stock $50,000 Additional Paid-in Capital $460,000

10,000 shares from treasury for $51 per share.

d. Cash $490,000 Treasury stock $50,000 Additional Paid-in Capital $440,000

10,000 shares from treasury for $49 per share.

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