Brief Exercise G-14 Pharoah Company is about to issue $271,500 of 7-year bonds p
ID: 2557547 • Letter: B
Question
Brief Exercise G-14
Pharoah Company is about to issue $271,500 of 7-year bonds paying an 12% interest rate, with interest payable semiannually. The discount rate for such securities is 8%.
Click here to view the factor table.
(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
How much can Pharoah expect to receive for the sale of these bonds? (Round answer to 0 decimal places, e.g. 2,575.)
Explanation / Answer
Pharoah can expect to receive $328,858 for the sale of bonds Statemnet showing Price or Intrinsic Value Particulars Time PVf 4% Amount PV Cash Flows (Interest) 0.50 0.9615 16,290.00 15,663.46 Cash Flows (Interest) 1.00 0.9246 16,290.00 15,061.02 Cash Flows (Interest) 1.50 0.8890 16,290.00 14,481.75 Cash Flows (Interest) 2.00 0.8548 16,290.00 13,924.76 Cash Flows (Interest) 2.50 0.8219 16,290.00 13,389.19 Cash Flows (Interest) 3.00 0.7903 16,290.00 12,874.22 Cash Flows (Interest) 3.50 0.7599 16,290.00 12,379.06 Cash Flows (Interest) 4.00 0.7307 16,290.00 11,902.94 Cash Flows (Interest) 4.50 0.7026 16,290.00 11,445.14 Cash Flows (Interest) 5.00 0.6756 16,290.00 11,004.94 Cash Flows (Interest) 5.50 0.6496 16,290.00 10,581.67 Cash Flows (Interest) 6.00 0.6246 16,290.00 10,174.69 Cash Flows (Interest) 6.50 0.6006 16,290.00 9,783.35 Cash Flows (Interest) 7.00 0.5775 16,290.00 9,407.07 Cash flows (Maturity Amount) 7.00 0.5775 271,500.00 156,784.48 Intrinsic Value of Bond or Current Bond Price 328,857.76
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