| Cash | 300,000 | | | | | Bonds Payable | | 300,000 | | | | | | | | (b) | 7/1/10 | Interest Expense | | | | | | ($300,000 X 9% X 3/12) | 6,750 | | | | | Cash | | 6,750 | | | | | | | | (c) | 12/31/10 | Interest Expense | 6,750 | | | | | Interest Payable | | 6,750 | 2. | Verbitsky Company: | | | | | | | | (a) | 6/1/10 | Cash | 210,000 | | | | | Bonds Payable | | 200,000 | | | |
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11.2 a. Determine the current value of the bond if present market conditions justify a 14 percent required rate of return. PV = CF^n / (1 +i) ^n PV = CF n / (1 + i)^4 PV = 70 / (1 + .14) ^4 PV = 70 / (1.14) ^4 PV = 70/ 1.14 + 70/ 1.30 + 70/ 1.48 + 70/ 1.69 PV = 61.40 + 53.85 + 47.30 + 41.42 = $203.97 PV of the par value = 1,000 PV = $203.97 + 1,000 = $1203.97 b. Now, suppose Twin Oaks' four-year bond had semiannual coupon payments. What would be its current value? (Assume a 7 percent
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with equity is: $3,000,000 x 85% = $2,550,000. Since the firm has $3,500,000 of net income, $950,000 = $3,500,000 - $2,550,000 will be left for dividends. 2. Question : (TCO F) The following data applies to Saunders Corporation's convertible bonds: Maturity: 10 Stock price: $30.00 Par value: $1,000.00 Conversion price: $35.00 Annual coupon: 5.00% Straight-debt yield: 8.00% What is the bond's conversion value? (a) $698.15 (b) $734.89 (c) $773.57 (d) $814.29 (e) $857.14 Instructor
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liabilities? Give two examples. What is a bond? Long-term liabilities are obligations that a company expects to pay after one year (Kimmel, 2007). Property, plants, and equipment are examples of long term liabilities. Bonds are a form of interest-bearing note payable issued by corporations, universities, and governmental agencies (Kimmel, 2007). (8) Contrast these types of bonds: (a) Secured and unsecured. (b) Convertible and callable. Secured bonds are bonds that have specific assets of the
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ICB Mutual FundIntroductionIt is a recognized principle that diversification of investment reduces risk. An individual may not have the time, expertise and resources to undertake such diversification. Here arises the advantage of a Mutual Fund. Mutual Funds pool the savings of a great number of investors and make investments in a wide array of securities. In Bangladesh ICB has pioneered Mutual Funds for the sake of investors and of the capital market.ICB Mutual FundsMutual Funds are also known as
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Intermediate Accounting II ACCTG 302 Section A Spring 2005 Instructor J.B. Paperman Exam #1 April 19, 2005 Name: ____________________________ INSTRUCTIONS: a) This exam is closed book. You may use one double-sided sheets of notes. You may use a calculator to assist in computations. b) You must complete this exam on your own. No assistance is allowed except that provided by the instructor. c) If you feel there is ambiguity in a problem, state your assumptions clearly
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Chapter 19 Initial Public Offerings, Investment Banking, and Financial Restructuring ANSWERS TO END-OF-CHAPTER QUESTIONS 19-1 a. A closely held corporation goes public when it sells stock to the general public. Going public increases the liquidity of the stock, establishes a market value, facilitates raising new equity, and allows the original owners to diversify. However, going public increases business costs, requires disclosure of operating data, and reduces the control of the original
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The risk return theory states that the bond with the higher risk with yield the higher return. Annual coupon payments affect bond valuation in multiple ways when compared to non-annual payments. The interest rates determine if the bonds sell at a discount or a premium. The coupon rates of 4.5% and 8.25% are selling at a discount, the 12.63% is selling at a premium. The effective annual rate of return ends up being 10.25% compared to the nominal 10% after semiannual compounding has been taken
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1. (TCO A) Which of the following statements is CORRECT? (Points : 10) One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. It is generally easier to transfer one’s ownership interest in a partnership than in a corporation. One of the advantages of the corporate form of organization is that it avoids double taxation. One of the advantages of a corporation from a social standpoint is that every stockholder has equal
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term used for investment banking is corporate finance. Investment banks work for companies and governments, and profit from them by raising money through the issuance and selling of securities in capital markets (both equity and debt) and insuring bonds (for example selling credit default swaps), and providing the necessary advice on transactions such as mergers and acquisitions. Most of investment banks provide strategic advisory services for mergers, acquisitions, divestiture or other financial
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