Question
Excercise 12-8 Floating-rate debt (LO 12-5) On January 1, 20X1, Brooks Energy issued $200 million of 15-year, floating-rate debentures at par value. The debentures pay
Excercise 12-8 Floating-rate debt (LO 12-5)
On January 1, 20X1, Brooks Energy issued $200 million of 15-year, floating-rate debentures at par value. The debentures pay interest on June 30 and December 31 of each year. The floating interest rate is set equal to LIBOR plus 6% on January 1 of each year. The LIBOR was 6% when the bonds were issued and 8% on January 1, 20X2.
Required:
- How much cash interest did Brooks Energy pay on the debentures in 20X1? How much will it pay in 20X2?
- How much interest expense did the company record on the debentures in 20X1? How much will it record in 20X2?
(Enter your answer in millions.)
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Managerial Economics Theory Applications and Cases
Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield
8th edition
978-0393124491, 393124495, 978-0039391277, 393912779, 978-0393912777
