Question

Madison Corporation is authorized to issue $840,000 of 5-year bonds dated June 30, 2019, with a stated rate of interest of 11%. Interest on the bonds is payable semiannually, and the bonds are sold on June 30, 2019.

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%	$

Answer 1

1. The bonds to yield 12%
	a	Semi-annual Interest Amount	$      46,200.00
		($840000*11%/2)
	b	PV Annuity Factor for (10 Years,6%)	7.3601
	c	Present Value Of Annual Interest (a*b)	$ 3,40,036.02
	d	Redemption Value	$ 8,40,000.00
	e	PV Factor Of (10 Years,6%)	0.55839
	g	Present Value Of Redemption Amount (d*e)	$ 4,69,051.61
	f	proceeds that the company will receive (c+g)	$ 8,09,087.63
2. The bonds to yield 10%
	a	Semi-annual Interest Amount	$      46,200.00
		($840000*11%/2)
	b	PV Annuity Factor for (10 Years,5%)	7.7217
	c	Present Value Of Annual Interest (a*b)	$ 3,56,744.15
	d	Redemption Value	$ 8,40,000.00
	e	PV Factor Of (10 Years,5%)	0.61391
	g	Present Value Of Redemption Amount (d*e)	$ 5,15,687.13
	f	proceeds that the company will receive (c+g)	$ 8,72,431.28
Note: Since you have not provided PV factor table hence I have used my PV factor table
	in which PV factor is not rounded off. If the answer is different it is only due to
	not rounding off of PV factor, let me know at how many decimal points pv factor was
	rounded off at your table.