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Part VI: Application of Time value of Money Concepts to Accounting Case 6.2: Big Valley Hospital Key concept: Bond issuance valuation and bond interest expense
Part VI: Application of Time value of Money Concepts to Accounting Case 6.2: Big Valley Hospital Key concept: Bond issuance valuation and bond interest expense he board of directors and CEO of Big valley Hospital have authorized temporary financing of a major hospital expansion by selling sio million of three-year term bonds with a coupon (stated) interest rate of 3 percent. Interest is payable annually. The CFO prepared the following principal and interest repayment table for the board's information: End of Year o End of Year 1 End of Year 2 End of Year3 Totals Bond face $10,ooo,ooo amount $300,ooo $300, ooo $300,ooo $900,000 Yearly interest $10, ooo,ooo $10, ooo, ooo Principal repayment $10,900,000 Total payments The CFO informed the board that, due to Big Valley Hospital's AAA credit rating, the market rate of interest at the date of bond issuance would only be 2 percent. Part VI: Application of Time value of Money Concepts to Accounting Case 6.2: Big Valley Hospital Key concept: Bond issuance valuation and bond interest expense he board of directors and CEO of Big valley Hospital have authorized temporary financing of a major hospital expansion by selling sio million of three-year term bonds with a coupon (stated) interest rate of 3 percent. Interest is payable annually. The CFO prepared the following principal and interest repayment table for the board's information: End of Year o End of Year 1 End of Year 2 End of Year3 Totals Bond face $10,ooo,ooo amount $300,ooo $300, ooo $300,ooo $900,000 Yearly interest $10, ooo,ooo $10, ooo, ooo Principal repayment $10,900,000 Total payments The CFO informed the board that, due to Big Valley Hospital's AAA credit rating, the market rate of interest at the date of bond issuance would only be 2 percent
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