Question
Sandhill Inc, Issues $2,800,000 of 7% bonds due in 10 years with interest payable at year-end....
Sandhill Inc, Issues $2,800,000 of 7% bonds due in 10 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 12% Click here to view factor tables What amount will Sandhill receive when it issues the bonds? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and final answer to decimal places, eg. 458,581.) Amount received by Sandhill when bonds were issued 5
Answers
Calculate the amount S will receive when bonds are issued as follows: A 1 Year از اخطار او اندامی B C D Payment PV factor @12% Present value 1 $196,000 0.892857143 $175,000.00 $196,000 0.797193878 $156,250.00 $196,000 0.711780248 $139,508.93 $196,000 0.635518078 $124,561.54 $196,000 0.567426856 $111.215.66 $196,000 0.506631121 $99.299.701 $196,000 0.452349215 $88,660.45 $196,000 0.403883228 $79,161.11 9 $196,000 0.360610025 $70,679.56 $2,800,000 0.321973237 $901,525.06 Present value of cash flows $1,945,862.02 10 Calculate the amount S will receive when bonds are issued using excel spreadsheet formula as follows:A B C D 1 Year Payment PV factor @12% Present value 2 1 =2800000*7% =1/((1+12%) A2) =B2*C2 3 2 =2800000*7% =1/((1+12% A3) =B3*C3 4 3 =2800000*7% =1/((1+12% A4) =B4*C4 5 4 =2800000*7% =1/((1+12% A5) =B5*C5 65 =2800000*7% =1/((1+12% A6 =B6*C6 76 =2800000*7% =1/((1+12% A7) =B7*C7 =2800000*7% =1/((1+12%A8) =B8C8 9 8 =2800000*7% =1/((1+12% A9) =B9*C9 10 9 =2800000*7% =1/((1+12% A10) =B10*C10 11 10 =2800000 =1/((1+12%) A11) 1=B11*C11 Present value of cash flows =SUM(D2:D11) 13 8 7 Therefore, the amount S will receive when bonds are issued is $1,945,862.02.
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