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Thomas Company is planning to issue $510,000 of 7%, five-year bonds payable to borrow for a major expansion. The owner, Simon Thomas, asks your
Thomas Company is planning to issue $510,000 of 7%, five-year bonds payable to borrow for a major expansion. The owner, Simon Thomas, asks your advice on some related matters. Read the requirements. Requirement 1. Answer the following questions. At what type of bond price will Thomas Company have total interest expense equal to the cash a. interest payments? Requirements 1. Answer the following questions: a. At what type of bond price will Thomas Company have total interest expense equal to the cash interest payments? b. c. Under which type of bond price will Thomas Company's total interest expense be greater than the cash interest payments? If the market interest rate is 9%, what type of bond price can Thomas Company expect for the bonds? 2. Compute the price of the bonds if the bonds are issued at 93. 3. How much will Thomas Company pay in interest each year? How much will Thomas Company's interest expense be for the first year? (Assume the straight-line method is used.) Print Done
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