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Answer:
We use the following formula for calculating the total value of liabilties that would flow into the balance sheet of Company Y
=> Bond Value + Total physical liabilities
Now for Value of bonds, we take the sum of present value of all future coupons and the prinicipal par value
= [640,000,000 x 0.05 x Present Value Annuity Factor (4%, 18 years)] + [640,000,000 x Present Value Factor(4%, 18 years)]
where 5% is the coupon rate and 640,000,000 is the face value
=> Value of bonds = 405,097,600 + 315904000 = = $721001600
Now we add it for the value of liabilities calculation
=> $721001600 + $42,680,000 = $763,681,600
QUESTION 24 Today, Company "A" purchases 100% of Company B Common Stock and assumes all of...
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