Sage Hill Inc. is building a new hockey arena at a cost of $2,050,000. It received a down payment of $410,000 from local businesses to support the project, and now needs to borrow $1,640,000 to complete the project. It therefore decides to issue $1,640,000 of 10-year, 10.5% bonds. These bonds were issued on January 1, 2020, and pay interest annually on each January 1. The bonds yield 10% to the investor and have an effective interest rate to the issuer of 10.4053%. (There is an increased effective interest rate due to the capitalization of the bond issue costs.) Any additional funds that are needed to complete the project will be obtained from local businesses. Sage Hill Inc. paid and capitalized $41,000 in bond issuance costs related to the bond issue. Sage Hill prepares financial statements in accordance with IFRS. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. |