Question

Sheffield 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 $3,128,500 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 anh torthin company Spikes After recante lustion that request the both on airectors has decided to raise financial instruments is 8%. 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, eg. 458,581.) Selling price of the bonds $

Answer 1

	Amount	PV factor 4%	Present value
Semi-annual interest	187710	17.29203	3245887
Principal	3128500	0.30832	964579
Total			4210466
Selling price of the bonds	4210466
Workings:
Semi-annual interest	187710	=3128500*12%/2
PV factor 4%:
Semi-annual interest	17.29203	=(1-(1.04)^-30)/0.04
Principal	0.30832	=1/1.04^30