Question

Cullumber Enterprises issued 10%, 8-year, $2,750,000 bonds that pay interest annually on April 1. The bonds are dated April 1 , 2022 , and are issued on that date. The discount rate for such bonds on April 1,2022 , is 12%. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What cash proceeds did Cullumber receive from issuance of the bonds? (Round answer to 0 decimal places, e.g. 125.) Cash proceeds from issuance of the bonds $______

Answer 1

Cullumber Enterprises received approximately $1,279,027.50 in cash proceeds from the issuance of the bonds.

The face value of the bonds is $2,750,000. The annual interest rate is 10%, and the bonds have an 8-year term. The discount rate is 12%.

From the factor table, the present value factor for 8 years and 12% interest rate is 0.46511.

Now, we can calculate the cash proceeds:

Cash Proceeds = Face Value × Present Value Factor

Cash Proceeds = $2,750,000 × 0.46511

Cash Proceeds ≈ $1,279,027.50

Therefore, Cullumber Enterprises received approximately $1,279,027.50 in cash proceeds from the issuance of the bonds.