Question

Exercise 6-13 Wildhorse Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company's bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $3,294,900 of 12% term corporate bonds on March 1, 2020, due on March 1, 2035, with interest payable each March 1 and September 1, with the first interest payment on September 1st, 2020. At the time of issuance, the market interest rate for similar financial instruments is 10%. Click here to view factor tables As the controller of the company, determine the selling price of the bonds. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Selling price of the bonds

Answer 1

Selling price of the bonds = Present value of interest at 5% for 30 years + Present value of maturity at 5% for 30 years

= 3294900*12%*6/12*15.37245 + 3294900*0.23138

= $3801415