Robbins Petroleum Company is five years in arrears on cumulative preferred stock dividends. There are 810,000 preferred shares outstanding, and the annual dividend is $7.50 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 stockholders for 80 percent of the dividends in arrears.

a) How much should the compensation be? Note: Do not round intermediate calculations. Input your answer in dollars, not millions (e.g. $1,234,000).

b) Robbins will compensate the preferred stockholders in the form of bonds paying 12 percent interest in a market environment in which the going rate of interest is 12 percent for similar bonds. The bonds will have a 15-year maturity. Using the bond valuation Table 16-2, indicate the market value of a $1,000 par value bond. Note: Round your answer to the nearest whole number.

c) Based on market value, how many bonds must be issued to provide the compensation determined in part a? Note: Do not round intermediate calculations and round your answer to the nearest whole number.