Crane Inc. manufactures cycling equipment. Recently, the vice president of opera
ID: 2591400 • Letter: C
Question
Crane 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 $3,086,500 of 9% 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 10%.
As the controller of the company, determine the selling price of the bonds.
Explanation / Answer
Amount PV factor Present value Interest 138892.5 15.37245 2135118 Principal 3086500 0.23138 714154 Selling price of the bond 2849272