Question
On January 1, 2018, a company issued ten-year bonds with a face value of $5,000,000 and a stated interest rate of 10%, payable semiannually on
On January 1, 2018, a company issued ten-year bonds with a face value of $5,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:
Present value of 1 for 10 periods at 10% .386
Present value of 1 for 10 periods at 12% .322
Present value of 1 for 20 periods at 5% .377
Present value of 1 for 20 periods at 6% .312
Present value of annuity for 10 periods at 10% 6.145
Present value of annuity for 10 periods at 12% 5.650
Present value of annuity for 20 periods at 5% 12.462
Present value of annuity for 20 periods at 6% 11.470
Calculate the amount of cash the company should receive from the bond issuance.
In order to earn partial credit, display your work in detail.
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