Question
Compute the folllowing using the interest factors given below from the interest tables: a) Compute the price (present value) of the bond issued by ABC
Compute the folllowing using the interest factors given below from the interest tables: a) Compute the price (present value) of the bond issued by ABC Company: face value = $7,000,000, interest rate = 6% (nominal and market rates are the same) and life of the bond is 8 years. Present value of $1 interest factor for 8 years and 6%: 0.6768 Present value of annuity interest factor for 8 years and 6%: 6.2098 b) VHP Company leased a group of equipment for 5 years at $52,000 per year lease payments. Assuming the interest rate is 7% (interest factor: 4.1002), should the company purchase this equipment for $225,000 or lease them. (Assume the equipment will have no salvage value at the end of the fifth year) c) XYZ Company purchased a building for $1,200,000, paid $200,000 cash and borrowed the $1,000,000 using 15 years, 6% mortagage. Note: the present value of annuity interest factor for 15 years and 6% is 9.7122. Compute the annual payments of the mortgage and determine the interest as well as the equity portion of the first payment.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started