Hathaway Manufacturing issued long-term debt on January 1, 1996. The debt has a face value of $300,000 and an annual stated interest rate of 10 percent. The debt matures on January 1, 2001. REQUIRED:

a. Assume that the debt agreement requires Hathaway Manufacturing to make annual inter¬ est payments every January 1. Set up a time line that indicates the timing and magnitude of the future cash outflows of this long-term debt.

b. Assume that the debt agreement requires Hathaway Manufacturing to make semiannual interest payments every July 1 and January 1. Set up a time line that indicates the timing and magnitude of the future cash outflows for this long-term debt.

c. Under the conditions of

(a) and (b), compute the present value of these two debt agree¬ ments assuming that the effective rate of interest is equal to the stated rate of interest