Exercise 6-13 Sheridan Inc. manufactures cycling equipment. Recently, the vice p

Question

Exercise 6-13 Sheridan 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 $3,454,600 of 10% term corporate bonds on March 1, 2017, due on March 1, 2032, with interest payable each March 1 and September 1, with the first interest payment on September 1st, 2017. At the time of issuance, the market interest rate for similar 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 O decimal places,e.g. 458,581.) Selling price of the bonds

Explanation / Answer

Price of the bond = c × F × (1 (1 + r)-t)/r+F(1 + r)t C=Interest Rate F= Face Value r=Market Interest Rate Price of Bond= Present value of Interest payments+Present value of the bond Price of Bond 172730*(1-(1.04)^-1)/.04)+3454600/(1.04)^30 (172730*(1-.30832)/.04)+3454600*.30832 4051969 Interest payment (3454600*5%) 172730 ans selling price of the bond $4051969

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