The founder of Frenza asks us to assist her in accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza The following Tableau Dashboard is provided to help us address her questions and provide recommendations for her business decisions Carrying Value Frenza Bond Amortization Unamortized Discount $100,000 $80,000 $60,000 $40,000 $20,000 SO Sanuary 1, Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31, Year 1 Year 2 Year Cash & Inventory for Competing Companies Lika Market Rate for Company Bonds Frenza Nelo 1046 Frenza 896 $50,000 Lika 696 $40,000 49 Nelo $30,000 29 $20,000 ON 510.000 Total Equity & Net Income 50 Frenza Lika Nelo Net Income $100.000 $110.000 185.000 Total Equity 5400,000 5510.000 $275.000 1. Based on the current market rates for bonds of Frenza Nelo, and Lika, which of the following bonds do lenders believe has the highest risk level? 2. If Frenza decided to issue new bonds with a contract rate of 11% would these new bonds be sold at a discount or premium based on the current market rate for Frenza bonds? 3. Frenza is planning an $160,000 expansion to launch a new product line, Frenze currently earns $100,000 in net income, and the new product line will yield $50,000 in additional income before any interest expense Frenza has three options: (1) do not expand (2) expand and issue $160,000 in debt that requires payments of 8% annual interest or (3) expand and raise $160,000 from oquity Tancing for each option 1, 2 and 3, compute(a) net income and (b) return on equity (Net income Equity Ignore any income tax offects Answer is not complete. Complete this question by entering your answers in the tabs below. Ret 1 und 2 1. Besed on the current market rates for bonds of fresca, Nelo, und ka, which of the following bonds do lenders believe has the highest risk level? 2. Frenza decided to we new bonds with a contract of 11% would these new bonds be sold at a discount of premium based on the current mon for Free bonds 1 Which of the song tons onders believes the risk level? Win the new bonds bestancourt or premium sed on the content market rate for rent bonds ma Premi Oo 2 Req3 > Reg 1 and 2 Req3 Frenza is planning an $160,000 expansion to launch a new product line. Frenza currently earns $100,000 in net income, and the vew product line will yield $50,000 in additional income before any interest expense. Frenza has three options: (1) do not expand, (2) expand and issue $160,000 in debt that requires payments of 8% annual interest, or (3) expand and raise $160,000 from equity financing. For each option 1, 2, and 3, compute (a) net income and (b) return on equity (Net income + Equity). Ignore any income tax effects. (Round "Return on equity" to 1 decimal place.) Show less Don't Expand Debt Financing Equity Financing Income before interest expense Interest expense Net income Equity Reumon
