Calculating the Fair Value of Debt

The Collins Corporation issued $45 million maturity value in notes, carrying a coupon rate of six percent, with interest paid semiannually. At the time of the note issue, equivalent risk-rated debt instruments carried yield rates of eight percent.

The notes matured in four years.

Calculate the proceeds that Collins Corporation will receive from the sale of the notes. Round your answer to the nearest dollar.

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How will the notes be disclosed on Collins balance sheet immediately following the sale? Round your answers to the nearest dollar.

Notes payable

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Less discount (enter as negative)

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Notes payable (net)

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Calculate the interest expense for Collins Corporation for the first year that the notes are outstanding. Do not round until final answer. Round answers to the nearest dollar.

First six months

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Second six months

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Calculate the balance sheet value of the notes at the end of the first year. Do not round until final answer. Round answer to the nearest dollar.

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