CHAPTER 14 – LONG-TERM LIABILITIES [pages 782-840`] LEARNING OBJECTIVES 1. Describe the formal procedures associated with issuing long-term debt. 2. Identify various types of bond issues. 3. Describe the accounting valuation for bonds at date of issuance. 4. Apply the methods of bond discount and premium amortization. 5. Describe the accounting for the extinguishment of non-current liabilities. 6. Explain the accounting for long-term notes payable. 7. Describe the accounting
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FREEPORT 1. Why do you think JPMorgan and Merrill Lynch were selected to underwrite and book-run all $23.3 billion in financings (all debt, common stock, and convertible), instead of sharing the underwriting with additional firms? JPMorgan and Merrill Lynch were selected to underwrite and book-run all of the financings because together they committed $6 billion in bridge loans and to underwrite the entire $17.5 billion in debt financing, plus $1.5 billion in credit lines. This created significant
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Chapter 7(13E) Bonds and Their Valuation Answers to End-of-Chapter Questions 7-1 From the corporation’s viewpoint, one important factor in establishing a sinking fund is that its own bonds generally have a higher yield than do government bonds; hence, the company saves more interest by retiring its own bonds than it could earn by buying government bonds. This factor causes firms to favor the second procedure. Investors also would prefer the annual retirement procedure if they thought
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Chapter 6 Q.7 Use the rate-of-return data for the stock and bond funds presented in Spreadsheet 6.1, but now assume the probability of each scenario is as follows: severe recession: 0.10; mild recession: 0.20; normal growth:0.35; boom: 0.35. (a) Would you expect the mean return and variance of the stock fund to be more than, less than, or equal to the values computed in Spreadsheet 6.2? Why? The variance is expected to increase because the probabilities of the extreme outcomes are now higher
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Solutions to Chapter 5 Valuing Bonds Note: Unless otherwise stated, assume all bonds have $1,000 face (par) value. 1. a. The coupon payments are fixed at $60 per year. Coupon rate = coupon payment/par value = 60/1000 = 6%, which remains unchanged. b. When the market yield increases, the bond price will fall. The cash flows are discounted at a higher rate. c. At a lower price, the bond’s yield to maturity will be higher. The higher yield
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1. What is the goal of financial management for a sole proprietorship? [pic]decrease long-term debt to reduce the risk to the owner [pic]maximize net income given the resources of the firm [pic]maximize the market value of the equity [pic]minimize the tax impact on the proprietor [pic]minimize costs and increase production 2. Working capital management includes which of the following? [pic]establishing the inventory level [pic]deciding when to pay suppliers [pic]determining the amount
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economic factors, the performance of long term economic growth and welfare of a country are related to its degree of financial sector development. Developed countries’ experience suggests that strong government bond market creates favorable environment for the development of an efficient corporate bond market although it is not always essential for a country to develop a government securities market. The financial markets, pivotal point of financial sector, execute a crucial role within the global economic
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Investment Vocabulary A Accretion of a Discount: A type of portfolio accounting in which there is a straight-line accumulation of capital gains on discount notes and bonds. Accrued Interest: The interest accumulated on a security since the issue date or since the last coupon payment. The buyer of the security pays the market price plus accrued interest. Active Market: A securities market in which a high volume of trading activity takes place. Advance Refunding: A treasury operation that offers
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The State of Bangladesh Debt Market A u g u s t 0 6 , 2 0 0 1 ™ End June 2000 Bank Deposits, 72.19% Tk 749.32 billion Debt Market, 27.81% Tk 288.64 billion Government, 99.64% Tk 287.60 billion Treasury bills, 26.58% Tk 76.45 billion Treasury bonds, 13.91% Tk 40.01 billion Savings schemes, 59.28%Tk 170.48 billion ™ Private, 0.36% Effective Yield Tk 1.04 billion 8.63% 7.02% 11.49% 16.58% 7.26% 13.98% The financial sector of Bangladesh is characterized by strong presence of commercial
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NATIONAL STOCK EXCHANGE OF INDIA LIMITED Test Details: Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 Name of Module Fees (Rs.) Test Duration (in minutes) 120 120 120 120 120 120 105 105 120 120 120 120 120 No. of Questions 60 60 60 60 60 60 60 60 60 60 60 60 100 Maximum Marks 100 100 100 100 100 100 100 100 100 100 100 100 100 Pass Certificate Marks Validity (%) (in years) 50 50 50 50 50 50 60 50 60 60 60 60 50 5 5 5 5 5 5 5 5 3 5 5 3 3 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33
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