Question

Everhart Company issues $15,000,000, 6%, 5-year bonds dated January 1, 2012 on January 1, 2012. The bonds pays interest semiannually on June 30 and December 31. The bonds are issued to yield 5%. What are the proceeds from the bond issue?

2.5% 3.0% 5.0% 6.0%
•Present value of a single sum for 5 periods .88385 .86261 .78353 .74726
•Present value of a single sum for 10 periods .78120 .74409 .61391 .55839
•Present value of an annuity for 5 periods 4.64583 4.57971 4.32948 4.21236
•Present value of an annuity for 10 periods 8.75206 8.53020 7.72173 7.36009
a. $15,000,000
b. $15,649,482
c. $15,656,427
d. $15,651,924

Answer 1

The proceeds from the bond issue would be $110,401,350.

Step-by-step explanation:

The proceeds from the bond issue can be calculated using the formula:

Proceeds = Face Value × Present Value Factor

Given that the face value of the bonds is $15,000,000 and the yield to maturity is 5%, we can use the present value of an annuity for 10 periods from the given information. The present value factor for an annuity for 10 periods is 7.36009.

Therefore, the proceeds from the bond issue would be:

Proceeds = $15,000,000 × 7.36009 = $110,401,350