corporation issues $3,000,000 of 8%, 10-year bonds, interest payable semiannually. At the time the bonds are issued, the market rate is 12%. Determine the present value of bonds at issuance using the present value table below. Show computations in good form. Present Value of Principal: PV of annuity: PV of Bond Payable=
corporation issues $3,000,000 of 8%, 10-year bonds, interest payable semiannually. At the time the bonds are issued, the market rate is 12%. Determine the present value of bonds at issuance using the present value table below. Show computations in good form. Present Value of Principal: PV of annuity: PV of Bond Payable=
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Question
A corporation issues $3,000,000 of 8%, 10-year bonds, interest payable semiannually. At the time the bonds are issued, the market rate is 12%. Determine the present
Present Value of Principal:
PV of annuity:
PV of Bond Payable=
Transcribed Image Text:P
e
PRESENT VALUE OF $1
RATE PER PERIOD
0.25%
0.50%
0.75%
1.00%
1.50%
2.00%
2.50%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
1
0.99751
0.99502
0.99256
0.99010
0.98522
0.98039
0.97561
0.97087| 0.96154
0.95238
0.94340
0.93458
0.92593
0.91743
0.90909
0.90090
0.89286
2
0.99502
0.99007
0.98517
0.98030
0.97066
0.96117
0.95181
0.94260
0.92456
0.90703
0.89000
0.87344
0.85734
0.84168
0.82645
0.81162
0.79719
3
0.99254
0.98515
0.97783
0.97059
0.95632
0.94232
0.92860
0.91514
0.88900
0.86384
0.83962
0.81630
0.79383
0.77218
0.75131
0.73119
0.71178
4
0.99006
0.98025
0.97055
0.96098
0.94218
0.92385
0.90595
0.88849
0.85480
0.82270
0.79209
0.76290
0.73503
0.70843
0.68301
0.65873
0.63552
5
0.98759
0.97537
0.96333
0.95147
0.92826
0.90573
0.88385
0.86261
0.82193
0.78353
0.74726
0.71299
0.68058
0.64993
0.62092
0.59345
0.56743
6
0.98513
0.97052
0.95616
0.94205
0.91454
0.88797
0.86230
0.83748 0.79031
0.74622
0.70496
0.66634
0.63017
0.59627
0.56447
0.53464
0.50663
7
0.98267
0.96569
0.94904
0.93272
0.90103
0.87056
0.84127
0.81309
0.75992
0.71068
0.66506
0.62275
0.58349
0.54703
0.51316
0.48166
0.45235
8
0.98022
0.96089
0.94198
0.92348
0.88771
0.85349
0.82075
0.78941
0.73069
0.67684
0.62741
0.58201
0.54027
0.50187
0.46651
0.43393
0.40388
0.93496
0.91434
0.80073 | 0.76642 | 0.70259
0.74409 0.67556
9
0.97778
0.95610
0.87459
0.83676
0.64461
0.59190
0.54393
0.50025
0.46043
0.42410
0.39092
0.36061
10
0.97534
0.95135
0.92800
0.90529
0.86167
0.82035
0.78120
0.61391
0.55839
0.50835
0.46319
0.42241
0.38554
0.35218
0.32197
11
0.97291
0.94661
0.92109
0.89632
0.84893
0.80426
0.76214
0.72242
0.64958
0.58468
0.52679
0.47509
0.42888
0.38753
0.35049
0.31728
0.28748
12
0.97048
0.94191
0.91424
0.88745
0.83639
0.78849
0.74356
0.70138
0.62460
0.55684
0.49697
0.44401
0.39711
0.35553
0.31863
0.28584
0.25668
13
0.96806
0.93722
0.90743
0.87866
0.82403
0.77303
0.72542 | 0.68095
0.60057
0.53032
0.46884
0.41496
0.36770
0.32618
0.28966
0.25751
0.22917
14
0.96565
0.93256
0.90068
0.86996
0.81185
0.75788
0.70773
0.66112 0.57748
0.50507
0.44230
0.38782
0.34046
0.29925
0.26333
0.23199
0.20462
15
0.96324
0.92792
0.89397
0.86135
0.79985
0.74301
0.69047
0.64186
0.55526
0.48102
0.41727
0.36245
0.31524
0.27454
0.23939
0.20900
0.18270
16
0.96084
0.92330
0.88732
0.85282
0.78803
0.72845
0.67362
0.62317
0.53391
0.45811
0.39365
0.33873
0.29189
0.25187
0.21763
0.18829
0.16312
17
0.95844
0.91871
0.88071
0.84438
0.77639
0.71416
0.65720
0.60502
0.51337
0.43630
0.37136
0.31657
0.27027
0.23107
0.19784
0.16963
0.14564
18
0.95605
0.91414
0.87416
0.83602
0.76491
0.70016
0.64117
0.58739
0.49363
0.41552
0.35034
0.29586
0.25025
0.21199
0.17986
0.15282
0.13004
19
0.95367
0.90959
0.86765
0.82774
0.75361
0.68643
0.62553
0.57029
0.47464
0.39573
0.33051
0.27651
0.23171
0.19449
0.16351
0.13768
0.11611
0.55368| 0.45639
0.53755 0.43883
20
0.95129
0.90506
0.86119
0.81954
0.74247
0.67297
0.61027
0.37689
0.31180
0.25842
0.21455
0.17843
0.14864
0.12403
0.10367
21
0.94892
0.90056
0.85478
0.81143
0.73150
0.65978
0.59539
0.35894
0.29416
0.24151
0.19866
0.16370
0.13513
0.11174
0.09256
22
0.94655
0.89608
0.84842
0.80340
0.72069
0.64684
0.58086
0.52189
0.42196
0.34185
0.27751
0.22571
0.18394
0.15018
0.12285
0.10067
0.08264
23
0.94419
0.89162
0.84210
0.79544
0.71004
0.63416
0.56670
0.50669| 0.40573
0.32557
0.26180
0.21095
0.17032
0.13778
0.11168
0.09069
0.07379
24
0.94184
0.88719
0.83583
0.78757
0.69954
0.62172
0.55288
0.49193
0.39012
0.31007
0.24698
0.19715
0.15770
0.12640
0.10153
0.08170
0.06588
25
0.93949
0.88277
0.82961
0.77977
0.68921
0.60953
0.53939
0.47761 0.37512
0.29530
0.23300
0.18425
0.14602
0.11597
0.09230
0.07361
0.05882
30
0.92783
0.86103
0.79919
0.74192
0.63976
0.55207
0.47674
0.41199 0.30832
0.23138
0.17411
0.13137
0.09938
0.07537
0.05731
0.04368
0.03338
35
0.91632
0.83982
0.76988
0.70591
0.59387
0.50003
0.42137
0.35538| 0.25342
0.18129
0.13011
0.09366
0.06763
0.04899
0.03558
0.02592
0.01894
40
0.90495
0.81914
0.74165
0.67165
0.55126
0.45289
0.37243
0.30656 | 0.20829
0.14205
0.09722
0.06678
0.04603
0.03184
0.02209
0.01538
0.01075
50
0.88263
0.77929
0.68825
0.60804
0.47500
0.37153
0.29094
0.22811
0.14071
0.08720
0.05429
0.03395
0.02132
0.01345
0.00852
0.00542
0.00346
Transcribed Image Text:P.
PRESENT VALUE OF ORDINARY ANNUITY
e
(annuity in arrears - end of period payments)
i
RATE PER PERIOD
0.25%
0.50%
0.75%
1.00%
1.50%
2.00%
2.50%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
0.99751
0.99502
0.99256
0.99010
0.98522
0.98039
0.97561
0.97087
0.96154
0.95238
0.94340
0.93458
0.92593
0.91743
0.90909
0.90090
0.89286
2
1.99252
1.98510
1.97772
1.97040
1.95588
1.94156
1.92742
1.91347
1.88609
1.85941
1.83339
1.80802
1.78326
1.75911
1.73554
1.71252
1.69005
2.85602 2.82861 2.77509
3.71710 3.62990
3
2.98506
2.97025
2.95556
2.94099
2.91220
2.88388
2.72325
2.67301
2.62432
2.57710
2.53129
2.48685
2.44371
2.40183
4
3.97512
3.95050
3.92611
3.90197
3.85438
3.80773
3.76197
3.54595
3.46511
3.38721
3.31213
3.23972
3.16987
3.10245
3.03735
5
4.96272
4.92587
4.88944
4.85343
4.78264
4.71346
4.64583
4.57971
4.45182
4.32948
4.21236
4.10020
3.99271
3.88965
3.79079
3.69590
3.60478
5.41719 5.24214
6.34939 | 6.23028 | 6.00205
7.01969 6.73274
6
5.94785
5.89638
5.84560
5.79548
5.69719
5.60143
5.50813
5.07569
4.91732
4.76654
4.62288
4.48592
4.35526
4.23054
4.11141
7
6.93052
6.86207
6.79464
6.72819
6.59821
6.47199
5.78637
5.58238
5.38929
5.20637
5.03295
4.86842
4.71220
4.56376
8
7.91074
7.82296
7.73661
7.65168
7.48593
7.32548
7.17014
6.46321
6.20979
5.97130
5.74664
5.53482
5.33493
5.14612
4.96764
9
8.88852
8.77906
8.67158
8.56602
8.36052
8.16224
7.97087
7.78611
7.43533
7.10782
6.80169
6.51523
6.24689
5.99525
5.75902
5.53705
5.32825
9.22218
8.53020 8.11090
9.25262 8.76048
10
9.86386
9.73041
9.59958
9.47130
8.98259
8.75206
7.72173
7.36009
7.02358
6.71008
6.41766
6.14457
5.88923
5.65022
10.83677 10.67703 10.52067 | 10.36763 | 10.07112 | 9.78685
12 11.80725 11.61893 11.43491 | 11.25508 10.90751| 10.57534| 10.25776 | 9.95400 9.38507
13 12.77532 12.55615 12.34235 12.13374 11.73153 11.34837 10.98318 10.63496 9.98565
14 13.74096 13.48871 13.24302 13.00370 12.54338 12.10625 11.69091 11.29607 10.56312 9.89864
15 14.70420 14.41662 14.13699 13.86505 13.34323 12.84926 12.38138 11.93794 11.11839 10.37966 9.71225
16 15.66504 15.33993 15.02431 14.71787 14.13126 13.57771 13.05500 12.56110 11.65230 10.83777 10.10590 9.44665
17 16.62348 16.25863 15.90502 15.56225 14.90765 14.29187 13.71220 13.16612 12.16567 11.27407 10.47726 | 9.76322
18 17.57953 17.17277 16.77918| 16.39827 15.67256 14.99203 14.35336 13.75351 12.65930 11.68959 10.82760 10.05909 9.37189
19 18.53320 18.08236 | 17.64683 17.22601 16.42617 15.67846 | 14.97889 14.32380 13.13394 | 12.08532 11.15812 | 10.33560 9.60360
20 19.48449 18.98742 18.50802 18.04555 17.16864| 16.35143 15.58916 | 14.87747 13.59033 12.46221| 11.46992 | 10.59401| 9.81815
21 20.43340 19.88798 19.36280 18.85698 17.90014 17.01121 16.18455 15.41502 14.02916 12.82115 11.76408 10.83553 10.01680 9.29224
22 |21.37995 20.78406 20.21121 19.66038 18.62082 17.65805 16.76541 15.93692 14.45112 13.16300 12.04158 11.06124 | 10.20074 9.44243
23 22.32414 |21.67568 | 21.05331 | 20.45582 | 19.33086 | 18.29220 17.33211| 16.44361 14.85684 13.48857 12.30338 11.27219 10.37106 9.58021
24 23.26598 22.56287 21.88915 | 21.24339 | 20.03041| 18.91393 17.88499 16.93554 15.24696 13.79864 12.55036 | 11.46933 10.52876 9.70661
25 24.20547| 23.44564 | 22.71876 | 22.02316 | 20.71961| 19.52346 | 18.42438 17.41315 15.62208 14.09394 12.78336 11.65358 10.67478 9.82258
30 28.86787 27.79405 | 26.77508 25.80771 | 24.01584 22.39646 | 20.93029 19.60044 17.29203 15.37245 13.76483 12.40904 | 11.25778 10.27365 9.42691
35 33.47243 32.03537 30.68266 29.40858 27.07559 24.99862 23.14516 21.48722 18.66461 16.37419 14.49825 12.94767 11.65457 10.56682 9.64416
40 38.01986 36.17223 34.44694| 32.83469 | 29.91585| 27.35548 25.10278 23.11477 19.79277 17.15909 15.04630 13.33171 11.92461 10.75736 9.77905
50 46.94617 44.14279 41.56645 | 39.19612 | 34.99969 31.42361 28.36231 25.72976 21.48218 18.25593 15.76186 13.80075 12.23348 10.96168 9.91481
11
9.51421
8.30641
7.88687
7.49867
7.13896
6.80519
6.49506
6.20652
5.93770
8.86325
8.38384
7.94269
7.53608
7.16073
6.81369
6.49236
6.19437
9.39357
8.85268
8.35765
7.90378
7.48690
7.10336
6.74987
6.42355
9.29498
8.74547
8.24424
7.78615
7.36669
6.98187
6.62817
9.10791
8.55948
8.06069
7.60608
7.19087
6.81086
8.85137
8.31256
7.82371
7.37916
6.97399
9.12164
8.54363
8.02155
7.54879
7.11963
8.75563
8.20141
7.70162
7.24967
8.95011
8.36492
7.83929
7.36578
9.12855
8.51356
7.96333
7.46944
8.64869
8.07507
7.56200
8.77154
8.17574
7.64465
8.88322
8.26643
7.71843
8.98474
8.34814
7.78432
9.07704
8.42174
7.84314
8.69379
8.05518
8.85524
8.17550
8.95105
8.24378
9.04165
8.30450
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