Determining the Proceeds from Bond Issues Madison Corporation is authorized to i
ID: 2519206 • Letter: D
Question
Determining the Proceeds from Bond Issues
Madison Corporation is authorized to issue $820,000 of 7-year bonds dated June 30, 2016, with a stated rate of interest of 11%. Interest on the bonds is payable semiannually, and the bonds are sold on June 30, 2016.
Required:
Determine the proceeds that the company will receive if it sells the following: (Click here to access the tables to use with this exercise and round your answers to two decimal places, if necessary.)
1. The bonds to yield 12% $ 2. The bonds to yield 10% $Explanation / Answer
1.The proceeds that the company will receive if The yield 12% = $7,81,890.57
Present Value of Bond = $8,20,000(PVF 6%,14 Years) + $45,100(PVAF 6%, 14 Years)
= ($8,20,000 x 0.4423) + ( $45,100 x 9.2950)
Value of Bond = $7,81,890.57
2.The proceeds that the company will receive if The yield 10% = $8,60,584.43
Present Value of Bond = $8,20,000(PVF 5%,14 Years) + $45,100(PVAF 5%, 14 Years)
= ($8,20,000 x 0.505068) + ( $45,100 x 9.89864094)
Value of Bond = $8,60,584.43
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