Aptim Finance Company, has accepted 3 year deposits from public to the tune of Rs. 200 crore at a cost of 16% and deployed the funds for a 3 year term at a floating rate of 5% above 364 day T-bill rate. Sheetal Leasing Ltd. has accessed the market for Rs. 200 crore with a 3-year floating rate bond, the interest on which is 3% above 364 day T-bill rate. These funds are deployed in a 3-year asset which gives a yield of 19.5%.
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- On 1 july 2018 BMw ltd issues $2 million in 10 year debentures that pay interest each six months at a coupon rate of 10 percent. At the time of issuing the securities, the market requires a rate of return of 12 %. Interest expense is determined using the effective interest method. Formula for PV of $1 in n periods = [1/1-(1+k)n/ k Formula for present value of annuity of $1 per period for n periods =[ 1-1/(1+k)n] / k where k is the discount rate expressed in decimal Required 1. Determine the issue price of the debenture 2. Provide the journal entries at 1 July 2018 and 30 June 2019On 1 July 2018 BMW Ltd issues $2 million in 10-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 12 per cent. Interest expense is determined using the effective-interest method. Formula for PV of $1 in n periods =1/(1+k)n Formula for present value of annuity of $1 per period for n periods = (1-1/ (1+k)n ) ÷ k where k is discount rate expressed in decimal Required: (i) Determine the issue price of the debenture. (ii) Provide the journal entries at 1 July 2018 and 30 June 2019.ABC company will contract a new loan in the sum of $2,000,000 that is secured by machinery and the loan has an interest rate of 6 percent. The company has also issued 4,000 new bond issues with an 8 percent coupon, paid semi-annually, and matures in 10 years. The bonds were sold at par and incurred a floatation cost of 2 percent per issue. 1. Does the New loan have anything to do with calculating the cost of debt? 2. Should the new loan be considered in the calculation of the weighted average cost of capital (WACC) of the company? if so how should it be added to the WACC formula.
- Thermo-Tech Systems recently sold a $20 million bond issue with a 20-year maturity and a coupon rate of 7% compounded semiannually. The bond indenture contract requires Thermo-Tech to make equal payments at the end of every 6 months into a sinking fund, which should accumulate the full $20 million required to redeem the bonds at their maturity. (Round all values to nearest $). a. What should be the size of the sinking fund payments if the fund earns 4.5% compounded semiannually? b. How much will the fund earn in the sixth year?. How much will the fund increase in the 27th payment interval? d. What is the semiannual cost of the debtThe Mills Company had issued a bond 10%, 10 year bonds with a face value of P1,000 each and paying a semi-annual interest payment at a required return of 12%. Required: Compute for the following: How much investor would be willing to pay for them? Approximate yield on the bonds;On April 1, 2015, Alpha Ltd. raised Rs. 100 million through zero-coupon bond with a maturity period of 3 years. The maturity value of the bond is Rs. 140.50 million and no interest is paid during the three-year period. The effective interest rate is 12% per year compounded annually. How this liability is shown in the Balance sheet at the end of first year (31st March, 2016)? Rs. 100 million as non-current liabilities (zero coupon bond) and Rs. 12 million as current liabilities (Interest Payable) Rs. 100 million as non-current liabilities (zero coupon bond) and Rs. 12 million as non-current liabilities (Interest Payable) Rs. 140.5 million as non-current liabilities (zero coupon bond) Rs. 100 million as non-current liabilities (zero coupon bond) and Rs. 13.50 million as non-current liabilities (Interest Payable)
- Edgar Ltd issues $7 million in 6-year, 10%, semi-annual coupon debentures. The rate of return required by the market is 8% per annum. What is the journal entry to record the first payment of interest assuming using the effective-interest method to amortise any discount or premium (rounded to the nearest dollar)?ABC Company will issue $5,600,000 in 8%, 10-year bonds when the market rate of interest is 10%. Interest is paid semiannually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:Determine how much cash ABC Company will realize from the bond issue. (Round your final answer to nearest whole dollar.)Cross Country Railroad Co. is about to issue $100,000 of 10-year bonds that pay a 5.5% annual interest rate, with interest payable semi-annually. The market interest rate is 5%. How much can Cross Country expect to receive for the sale of these bonds? To calculate, use (a) the present value tables, (b) a financial calculator, or (c) Excel function PV. (Unknown Rate) HQ Ltd. purchased a used truck from Trans Auto Sales Inc. HQ paid a $4,000 down payment and signed a note that calls for 36 payments of $1,033.34 at the end of each month. The stated rate of interest in the note is 4%. As an incentive for entering into the contract, Trans has agreed to forgive the first two payments under the lease.InstructionsWhat was the purchase price of the used truck excluding the incentive given? To calculate, use (1) a financial calculator or (2) Excel function PV.What effect, if any, does the forgiveness of the first two payments have on the purchase price of the truck?Calculate the present value of…
- To help finance a major expansion, GAMA Company sold a bond with 20 years to maturity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. What is the component cost of debt for use in the WACC calculation? Show work in excel and explain answerA company has issued 11-year bonds, with a face value of Php1,000,000, in P1,000 units. Interest at 15% is paid quarterly. If an investor desires to earn 21% nominal interest on Php100,000 worth of these bonds, what would the selling price have to be?Consolidated Enterprises issues €10 million face value, fi ve-year bonds with a couponrate of 6.5 percent. At the time of issuance, the market interest rate is 6.0 percent. Usingthe eff ective interest rate method of amortisation, the carrying value after one year will beclosest to:A . €10.17 million.B . €10.21 million.C . €10.28 million.