UNDERSTANDING BUSINESS (LL/ACCESS)
13th Edition
ISBN: 9781264671656
Author: Nickels
Publisher: MCG
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Question
Chapter 19.4, Problem 7TP
Summary Introduction
To discuss: The meaning of 9 percent debenture bond due in 2028.
Introduction: Bond refers to a debt instrument which has longer period for maturity and a fixed interest rate. Bonds are issued at that time when entity needs huge amount of fund.
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What is a fair price for a $1000 face value bond that pays a 3% semiannual coupon that
matures in 4 years if I want a 5.5% rate of return on my investment?
Scenario
Your corporation has just approved an 8-year expansion plan to grow its market share. The plan requires an influx of cash in each of the 8 years. Management wants to develop a financial plan to ensure the cash needed for the expansion will be available at the beginning of each of the 8 years.
The corporation has the following investment options:
Security
Price per unit
Return Rate (%)
Years to Maturity
1
$1,200
10.255
5
2
$1,000
6.7550
6
3
$1,175
12.110
7
Savings Account
5.500
Each unit of security 1, 2, and 3 guarantees to pay $1,000 at maturity. Investments in these securities must take place only at the beginning of year 1 and will be held until maturity. Any funds not invested in securities will be invested in a savings account that pays the annual interest rates noted above.
The following table summarizes the cash needs for the expansion plan for each of the 8 years:
Year 1 = $250,000
Year 5 = $295,000…
A company has $500 million in total assets, $10 million in notes payable, and $45.6 million in long-term debt. What is the debt ratio?
Chapter 19 Solutions
UNDERSTANDING BUSINESS (LL/ACCESS)
Ch. 19.2 - Prob. 1TPCh. 19.2 - Prob. 2TPCh. 19.2 - Prob. 3TPCh. 19.3 - Prob. 19.3AQCh. 19.3 - Prob. 4TPCh. 19.3 - Prob. 5TPCh. 19.4 - Prob. 6TPCh. 19.4 - Prob. 7TPCh. 19.4 - Prob. 8TPCh. 19.4 - Prob. 9TP
Ch. 19.5 - Prob. 1MEDCh. 19.5 - Prob. 10TPCh. 19.5 - Prob. 11TPCh. 19.5 - Prob. 12TPCh. 19.8 - Prob. 13TPCh. 19.8 - Prob. 14TPCh. 19.8 - Prob. 15TPCh. 19.8 - Prob. 16TPCh. 19.9 - Prob. 19.9AQCh. 19.9 - Prob. 19.9BQCh. 19.9 - Prob. 17TPCh. 19.9 - Prob. 18TPCh. 19.9 - Prob. 19TPCh. 19 - Prob. 1CECh. 19 - Prob. 2CECh. 19 - Prob. 3CECh. 19 - Prob. 4CECh. 19 - Prob. 1CTCh. 19 - Prob. 2CTCh. 19 - Prob. 3CTCh. 19 - Prob. 4CTCh. 19 - Prob. 5CTCh. 19 - Prob. 1DCSCh. 19 - Prob. 3DCSCh. 19 - Prob. 1VCCh. 19 - Prob. 2VCCh. 19 - Prob. 3VC
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