Osmond Dental Products is three years in arrears on cumulative preferred stock dividends. There are 710,000 preferred shares outstanding, and the annual dividend is $8.50 per share. The vice-president of finance sees no real hope of paying the dividends in arrears. She is devising a plan to compensate the preferred shareholders for 80 percent of the dividends in arrears.

a. How much should the compensation be?

Compensation $

b. Osmond will compensate the preferred shareholders in the form of bonds paying 11 percent interest in a market environment in which the going rate of interest is 13 percent. The bonds will have a 20-year maturity. Indicate the market value of a $1,000 par value bond. (Note: Interest is paid semi-annually.) (Use financial calculator. Round the final answer to 2 decimal places.)

Bond value $

c. Based on market value, how many bonds must be issued to provide the compensation determined in part a? (Do not round intermediate calculations. Round the final answer to the nearest whole dollar.)

Bonds issued