E6.13 (LO 5) (Computation of Bond Liability) Hincapie Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the companys bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $2,000,000 of 11% term corporate bonds on March 1, 2020, due on March 1, 2035, with interest payable each March 1 and September 1. At the time of issuance, the market interest rate for similar financial instruments is 10%.

Instructions

As the controller of the company, determine the selling price of the bonds.

E6-13 Principal Interest $ $ 2,000,000 $ Given 110,000 I=Principal x Rate x Time Use the rate stated on the bond Interest Principal (a) Use market rate/yield rate 15 15 i= n= Table Factor Calculation: $ PV of $1 PVOA $ $ Amount we would pay (or issue) our bonds