Present Value of Bonds Payable; Premium Moss Co. issued $42,000,000 of five-year, 11% bonds, with interest...

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Answer 1

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Answer #1

Answer:

Computation of Present Value:

Present Value of Face amount of $ 42,000,000 due in 5 years at 9 % compounded semi-annually

= $ 42,000,000 * 0.643930

= $ 27,045,060

Note:

PV of $ 1 at compounded interest of 8 years = 0.643930

Computation of Present Value of Semi-Annual Interest Payments :

Present Value of Semi-Annual Interest Payments of $ 2,310,000 at 9% compounded Semi-Annually

= $ 2,310,000 * 7.91272

= $ 18,278,383

Present Value of Bonds

= Present Value of Face amount + Present Value of Semi-Annual Interest Payments

= $ 27,045,060 + $ 18,278,383

= $ 45,323,443

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Answer 2

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