Brief Exercise G-17 Sandhill Co. issued 8%, 8-year, $2,669,100 par value bonds t

Question

Brief Exercise G-17 Sandhill Co. issued 8%, 8-year, $2,669,100 par value bonds that pay interest semiannually on October 1 and April 1, The bonds are dated April 1, 2017, and are issued on that date. The discount rate of interest for such bonds on April 1, 2017, is 8%. Click here to view the factor table (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What cash proceeds did Sandhill receive from issuance of the bonds? (Round answer to O decimal places, e.g. 125.) Cash proceeds from issuance of the bonds s Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT

Explanation / Answer

SOLUTION

Face value = $2,669,100

Semi-Annual Interest Payments = $2,669,100 * 8% / 2 = $106,764

No. of periods = 8 * 2 = 16

Discount rate to be used = 8% / 2 = 4%

Present value of face value = $2,669,100 * 0.53390 = $1,425,032

Present value of interest payments = $106,764 * 11.65229 = $1,244,045

Cash proceeds from issuance of bonds =  $1,425,032 + $1,244,045 = $2,669,077

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