Answer:
1. G
2. D
3. A
4. H
5. E
6. B
7. C
8. F
Explanation:
1. First-in, first-out method: A process costing method that costs each period’s equivalent units of work with that period’s costs per equivalent unit
2. Equivalent units: Measure of the work done during a production period, expressed in terms of fully complete units of output
3. Direct labor and factory overhead: Conversion costs
4. Cost of production report: Summary of the activity in a processing department for a specific period
5. Process costing: Costing system used by a company producing computer chips
6. Direct labor and direct materials: Prime costs
7. Transferred-in costs: Costs incurred in a previous process that are carried forward as part of the product’s cost when it moves to the next department
8. Job order costing: Costing system used by a company producing custom window treatments.
Patricia Ness is a lawyer specializing in employment law. Her clients showed her that the right-to-work laws create many problems for unionized workers. Therefore, she has started a petition to change the situation. In addition, she publishes a blog on the topic, and she takes every opportunity to talk publicly about the issue. Her tendency to identify opportunities, show initiative, take action, and persevere is typical of this personality trait.
a. Conscientious Personality
b. Introverted Personality
c. Narcissistic Personality
d. Sell Monitoring Personality
e. Proactive Personality
Answer:
a. Conscientious Personality
Explanation:
Conscientiousness can be regarded as personality trait that involves one to be
careful as well as diligent in performing tasks,/ obligations. This trait make one to be efficient and organized
6. Which of the following statements is NOT an element of a well-designed Service System?a. It is consistent with the operating focus of the firm.b. It is user-friendly so customers can easily interact with the service process.c. It is robust and therefore capable of coping with variations in demand and resource availability.d. It is structured so that consistent performance by its people and systems is easily maintained.e. It effectively separates the back office and the front office so each can focus on their own tasks in order to optimize their departmental performance.
Answer:
e. It effectively separates the back office and the front office so each can focus on their own tasks in order to optimize their departmental performance.
Explanation:
A service system is one that is focused on the growth of technology and information system. It's designed to give services that meet the expectations, needs, and wants of clients. It is apart of service management, sued in service operations, and found in service marketing. It's designed for client contact, capital flows, and the level of customer involvement.ounie Corporation has two divisions: the South Division and the West Division. The corporation's net operating income is $95,400. The South Division's divisional segment margin is $45,100 and the West Division's divisional segment margin is $185,500. What is the amount of the common fixed expense not traceable to the individual divisions
Answer:
$135,200
Explanation:
With regards to the above information, both sales and variable cost are dependent on the number of units sold.
The contribution margin is arrived at by deducting the variable cost from sales. Also, the contribution margin minus the fixed cost gives net operating income.
Therefore, total fixed cost of the corporation not traceable to individual division
= $185,500 + $45,100 - $95,400
= $135,200
The Cavy Company estimates that the factory overhead for the following year will be $250,000. The company calculated its Predetermined Overhead Rate to be $31.25 per machine hour for the year. The machine hours incurred for the month of April for all of the jobs were 4,780. If the actual factory overhead totaled $141,800, determine the over- or underapplied amount for the month.
Answer:
Overapplied overhead= $7,575 overapplied
Explanation:
First, we need to allocate overhead costs based on actual hours:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 31.25*4,780
Allocated MOH= $149,375
Now, the over/under allocation:
Under/over applied overhead= real overhead - allocated overhead
Under/over applied overhead= 141,800 - 149,375
Overapplied overhead= $7,575 overapplied
Joseph shops for sugar at the grocery store. There are two types of sugar to choose from: a two-pound bag and a five-pound bag. If Joseph buys six two-pound bags and three five-pound bags, he will owe the store $24. If he buys three two-pound bags and one five-pound bag, he will owe the store $10. What is the price for a five-pound bag of sugar?
Answer:
$4
Explanation:
Let T = number of two pound sugar bags
and F = number of five pound sugar bags
6T + 3F = 24
3T + 1F = 10
F = 10 - 3T
replace in first equation
6T + [3 x (10 - 3T)] = 24
6T + 30 - 9T = 24
6 = 3T
T = $2
F = 10 - (3 X $2) = $10 - $6 = $4
In the production of a wooden chair within the circular flow model, what would the resource market include?
A
furtniture company
B
office supply company
forest
D
wooden chairs
Answer:
forest/trees
Explanation:
At December 31, 2020, Albrecht Corporation had outstanding 228,000 shares of common stock and 10,000 shares of 9.5%, $100 par value cumulative, nonconvertible preferred stock. On May 31, 2021, Albrecht sold for cash 12,000 shares of its common stock. No cash dividends were declared for 2021. For the year ended December 31, 2021, Albrecht reported a net loss of $187,000.
Required:
Calculate Albrecht's net loss per share for the year ended December 31, 2021.
Answer: ($1.20) per share
Explanation:
As these are cumulative preferred shares, their dividends will have to be paid eventually so they will add to the net loss.
Preferred dividend = 10,000 * 9.5% * 100
= $95,000
The weighted average number of shares is also needed:
Stock was sold on May 31 thereby leaving 7 months in the year.
= 228,000 + (12,000 * 7/12)
= 235,000 common shares
Net loss per share = (187,000 + 95,000) / 235,000
= ($1.20) per share
Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 60,000 shares of cumulative preferred 2% stock, $60 par and 300,000 shares of $20 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $51,000; second year, $105,000; third year, $81,000; fourth year, $120,000.
Required:
Determine the dividends per share on each class of stock for each of the four years.
Answer:
The Preferred shares are cumulative which means that they will have to be paid eventually even if they weren't completed in one period.
Preferred dividend:
= 60,000 * 60 * 2%
= $72,000 per year
First year:
Preferred dividend Common Dividend
= $51,000 = $0
They will collect it all and be owed:
= 72,000 - 51,000
= $21,000
Second year:
Preferred dividend Common Dividend
= 21,000 + 72,000 = 105,000 - 93,000
= $93,000 = $12,000
Preferred accrued has been
paid off.
Third year:
Preferred dividend Common Dividend
= $72,000 = 81,000 - 72,000
= $9,000
Fourth year:
Preferred dividend Common Dividend
= $72,000 = 120,000 - 72,000
= $48,000
On January 1, 2017 Preibus acquired 100 % of Spicer. This acquisition was not a bargain purchase. On the date of acquisition, Spicer's Equipment had a net book value of 1,600,000 and a fair value of 1,723,000. Preibus determined that Spicer's equipment had a remaining life of 5 years at the date of acquisition. What is the consolidation adjustment (in addition to adding the two trial balance amounts together) that must be made to the Equipment account when preparing consolidated statements for Preibus as of 12/31/2017
Answer:
Dr Investment in Spicer $123,000
Cr Equipment $123,000
Dr Equipment $24,600
Cr Depreciation expense $24,600
Explanation:
Preparation of the consolidation adjustment that must be made to the Equipment account when preparing consolidated statements for Preibus as of 12/31/2017
Dr Investment in Spicer $123,000
Cr Equipment $123,000
(1,600,000-1,723,000)
(To record the equipment at their fair value)
Dr Equipment $24,600
Cr Depreciation expense $24,600
($123,000/5 years)
(To record excess Depreciation charged on overvalued Equipment)
why is marketing research important to a business enterprise { essay }
Answer:
Market research can identify how customers and potential customers might view your business and identify gaps in customer expectations. This is powerful information to have when completing your marketing strategy. Having good market intelligence helps to minimise risks when making key business decisions.
Explanation:
hope it helps and can I have brainless.
Hadley Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $131 Units in beginning inventory 50 Units produced 2,110 Units sold 1,110 Units in ending inventory 1,050 Variable costs per unit: Direct materials $ 45 Direct labor $ 33 Variable manufacturing overhead $ 9 Variable selling and administrative expense $ 7 Fixed costs: Fixed manufacturing overhead $18,990 Fixed selling and administrative expense $22,200 What is the total period cost for the month under variable costing
Answer:
Period costs= $48,960
Explanation:
Giving the following information:
Units sold 1,110
Variable selling and administrative expense $ 7
Fixed manufacturing overhead $18,990
Fixed selling and administrative expense $22,200
Under the variable costing method, the period costs include the fixed manufacturing overhead, selling, and administrative costs both fixed and variable.
Period costs= (7*1,110) + 18,990 + 22,200
Period costs= $48,960
An economic model used to illustrate the concepts of opportunity cost, efficiency, and economic growth is known as which of the following?
А
the production possibilities frontier
B
the Lorenz curve
с
the paradox of value
D
the factors of production
Answer:
the factors of production
Answer:
the factors of production
Explanation:
Which item shows a credit balance in the Trial Balance?
O
A/P
A/R
Expesnes
O Land
Answer:
Asset and expense accounts appear on the debit side of the trial balance whereas liabilities, capital and income accounts appear on the credit side.
Answer:
A/P
Explanation:
A/R is assets, A/P is liability.
Vaughn Company issues 11,300 shares of restricted stock to its CFO, Mary Tokar, on January 1, 2020. The stock has a fair value of $565,000 on this date. The service period related to this restricted stock is 5 years. Vesting occurs if Tokar stays with the company until December 31, 2024. The par value of the stock is $10. At December 31, 2020, the fair value of the stock is $396,000.
1. Prepare the journal entries to record the restricted stock on January 1, 2017 (the date of grant), and December 31, 2018.
2. On July 25, 2021, Tokar leaves the company. Prepare the journal entry to account for this forfeiture.
I think you made mistakes in the dates which i have corrected in the explanations----Prepare the journal entries to record the restricted stock on "January 1, 2017" (the date of grant), and "December 31, 2018"
Answer: Please see answer in explanation column
Explanation:
To record unearned compensation
Date Account titles and explanation Debit Credit
Jan 1, 2020 Unearned compensation $565,000
To Common stock ( 11,300 shares × $10) $113,000
To Paid in capital in excess of par - common stock $452,000
To record the compensation expense
Date Account titles and explanation Debit Credit
Dec 31, 2020 Compensation expenses $113,000
To Unearned compensation $113,000
Calculation:
Compensation expenses =$565,000 ÷ 5 years= $113,000
To record the forfeiture
Date Account titles and explanation Debit Credit
July 25, 2021 Common stock $113,000
Paid in capital in excess of par - common stock $452,000
To Compensation expenses $113,000
To Unearned compensation $452,000
Calculation:
Common stock ( 11,300 shares × $10)= $113,000
To Compensation expenses $113,000 ($113,000 × 1 year) January 1, 2020-July 25, 2021,
Unearned compensation =fair value of $565,000 --Compensation expenses of $113,000 = $452,000
Using the following data taken from Hsu's Imports Inc. which uses a periodic inventory system, prepare the cost of goods sold section of the income statement for the year ended March 31.
Inventory, April 1 $193,250
Inventory, March 31 180,100
Purchases 1,079,600
Purchases returns and allowances 51,200
Purchases discounts 18,500
Sales 1,860,000
Freight in 19,250
Answer:
COGS= $1,042,300
Explanation:
To calculate the cost of goods sold, we need to use the following formula:
COGS= beginning finished inventory + cost of goods purchased - ending finished inventory
First, we need to calculate the cost of goods purchased:
cost of goods purchased= purchases - Purchases returns and allowances - Purchases discounts + Freight in
cost of goods purchased= 1,079,600 - 51,200 - 18,500 + 19,250
cost of goods purchased= 1,029,150
Now, the COGS:
COGS= 193,250 + 1,029,150 - 180,100
COGS= $1,042,300
Explanation:
Using the following data taken from Hsu's Imports Inc. which uses a periodic inventory system, prepare the cost of goods sold section of the income statement for the year ended March 31.
Inventory, April 1 $193,250
Inventory, March 31 180,100
Purchases 1,079,600
Purchases returns and allowances 51,200
Purchases discounts 18,500
Sales 1,860,000
Freight in 19,250
somebody help pls you own a business in your community and you want to convince your community to support the local businesses. Explain five of your roles as an entrepreneur in the social development of the society to convince members of the community to support your business
Answer and Explanation:
Helping local businesses is very important and should be encouraged in all communities, across the country. As a local merchant, you can take steps to help yourself and other local merchants.
Among these attitudes, we can consider:
Design a business that offers differentiated products and services: one of the main threats to local commerce is large corporations. These corporations present products and services with little personality and consideration to the customer. Changing this type of attitude in your trade can help you to be valued.
Provide services and products with high demand in the region: By providing products and services in high demand, you will be able to attract a loyal clientele to your establishment, as you are able to offer exactly what customers want.
Provide competitive prices: Local businesses need to compete with large corporations that generally promote lower prices for their products and services. Providing lower prices can be a challenge for the local merchant, but it is important that he look for strategies to make the price of his products and services competitive, making his establishment a good option for the customer.
Create a support network between local merchants: This allows merchants to unite and refer to each other, as well as allowing them to think together about ways to optimize local trade.
Provide a variety of products and services: This makes your trade richer and more attractive to customers who may have your establishment as a place that will meet their needs.
Nick manages a grocery store in a country experiencing a high rate of inflation. He is paid in cash twice per month. On payday, he immediately goes out and buys all the goods he will need over the next two weeks in order to prevent the money in his wallet from losing value. What he can't spend, he converts into a more stable foreign currency for a steep fee. This is an example of the of _________inflation.
a. menu costs
b. shoe-leather costs
c. unit-of-account costs
Answer:
I believe the answer is B, so Shoe leather Cost
labor force
200 million
Adults in the military
1 million
Population below 16
50 million
Employed adults
180 million
Institutionalized adults
3 million
Not in labor force
40 million
1. What is the total population? 1 pt. (Show your work)
2. How many people are unemployed, and what is the unemployment rate? 2 pts.
3. What is the labor force participation rate? 1 pt.
Answer:
not entirely sure if that's how you are suppose to do it. but that's how I would've done it.
A proposed nuclear power plant will cost $2.2 billion to build and then will produce cash flows of $300 million a year for 15 years. After that period (in year 15), it must be decommissioned at a cost of $900 million. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in billions rounded to 3 decimal places.)
a. What is the NPV of the project if the discount rate is 5%?
b. What is the NPV of the project if the discount rate is 18%?
Answer:
$0.481 billion
$-0.748 billion
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Cash flow in year 0 = $-2.2 billion
Cash flow each year from year 1 to 14 = 0.3 billion
Cash flow in year 15 = 0.3 - 0.9 = -0.6 billion
NPV of the project if the discount rate is 5%? = $0.481 billion
b. What is the NPV of the project if the discount rate is 18% = $-0.748 billion
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
1.
What is CASS and what is its purpose?
Based on the following production and sales data of Frixion Co. for March of the current year, prepare the following:
Product T Product X
Estimated inventory, March 1 28,000 units 20,000 units
Desired inventory, March 31 32,000 units 15,000 units
Expected sales volume:
Territory I 320,000 units 260,000 units
Territory II 190,000 units 130,000 units
Unit sales price $6 $14
A. Prepare a sales budget.
B. Prepare a production budget.
Answer:
A. Totals Sales in Territories I and II are as follows:
Product T Totals Sales in Territories I and II = $3,060,000
Product X Totals Sales in Territories I and II = $5,460,000
B. Required Production Units in March are as follows:
Product T Required Production Units in March = 514,000
Product T Required Production Units in March = 385,000
Explanation:
A. Prepare a sales budget.
Note: See part a of the attached excel file for sales budget and the formulae used in the calculations.
From the attached excel file, Totals Sales in Territories I and II are as follows:
Product T Totals Sales in Territories I and II = $3,060,000
Product X Totals Sales in Territories I and II = $5,460,000
B. Prepare a production budget.
Note: See part b of the attached excel file for sales budget and the formulae used in the calculations.
From the attached excel file, Required Production Units in March are as follows
Product T Required Production Units in March = 514,000
Product X Required Production Units in March = 385,000
20. The shipment of goods or rendering of services to a foreign buyer, located in a
foreign country is:
Importing
Exporting
Foreign Exchange
Importing and Exporting
On December 31, 2020, Ainsworth, Inc., had 560 million shares of common stock outstanding. Fifteen million shares of 7%, $100 par value cumulative, nonconvertible preferred stock were sold on January 2, 2021. On April 30, 2021, Ainsworth purchased 30 million shares of its common stock as treasury stock. Twelve million treasury shares were sold on August 31. Ainsworth issued a 5% common stock dividend on June 12, 2021. No cash dividends were declared in 2021. For the year ended December 31, 2021, Ainsworth reported a net loss of $120 million, including an after-tax loss from discontinued operations of $360 million. Required: 1. Compute Ainsworth's net loss per share for the year ended December 31, 2021. 2. Compute the per share amount of income or loss from continuing operations for the year ended December 31, 2021. 3. Prepare an EPS presentation that would be appropriate to appear on Ainsworth's 2021 and 2020 comparative income statements. Assume EPS was reported in 2020 as $0.75, based on net income (no discontinued operations) of $420 million and a weighted-average number of common shares of 560 million.
Answer:
Ainsworth, Inc.
1. Net loss per share for the year ended December 31, 2021:
= $0.211
2. Per share amount of income from continuing operations
= $0.422
3. Comparative Income Statements:
2021 2020
Net income (continuing operations) $240 million $420 million
Net income (including
discontinued operations) ($120 million) $0
Weighted-average common stock shares 558 million 560 million
EPS (continuing operations) $0.43 $0.75
EPS (including discontinued operations) ($0.21) $0
Explanation:
a) Data and Calculations:
December 31, 2020:
Outstanding common stock = 560 million shares
Outstanding 7%, Cumulative non-convertible preferred stock = 15 million shares at $100 par value
April 30, 2021:
Treasury stock purchased = 30 million
June 12, 2021:
5% Common Stock dividend = 26.5 million shares(530 million * 5%)
August 31, 2021:
Treasury stock sold = 12 million
December 31, 2021: Outstanding common stock = 568.5 million
Therefore, net income from continuing operations = $240 million
After-tax loss from discontinued operations = $360 million
December 31, 2021 reported net loss = ($120 million)
1. Net loss per share for the year ended December 31, 2021:
= $120 million/568.5 million = $0.211
2. Per share amount of income from continuing operations = $240 million/568.5 million = $0.422
3. Comparative Income Statements:
2021 2020
Net income (continuing operations) $240 million $420 million
Net income (including
discontinuing operations) ($120 million) $0
Weighted-average common stock shares 558 million 560 million
EPS (continuing operations) $0.43 $0.75
EPS (including discontinued operations) ($0.21) $0
Weighted-average of Common Stock shares:
January 1, 2021: Outstanding 560 million * 12/12 = 560 million
April 30, 2021: Treasury stock 30 million * 8/12 = -20 million
June 12, 2021: Stock dividend 26.5 million *6.5/12 14 million
August 31, 2021: Treasury stock sold 12 million *4/12 4 million
December 31, 2021: Weighted-average outstanding = 558 million
Walt occasionally borrows the car of his friend, Jesse. Jesse has a PAP with liability limits of 250/500/100. Walt also has a PAP, and his liability limits are also 250/500/100. Walt had an accident while using Jesse's car and was found to be legally liable for $350,000 in bodily injury costs sustained by one person. How much will be paid by Walt's policy
Answer: $250,000
Explanation:
Liability limits go as follows:
The first number is the maximum amount payable for the bodily injury suffered by one person. The second is the maximum amount payable per accident. The third number is the maximum payable for property damage.These numbers are in thousands.
As Walt was the one driving, his insurance will kick in first and his policy will pay the maximum that it can pay for bodily injury costs to one person.
That amount as shown is the first number in his limits which is $250,000.
Quantum Logistics, Inc., a wholesale distributor, is considering the construction of a new warehouse to serve the southeastern geographic region near the Alabama-Georgia border. There are three cities being considered. After site visits and a budget analysis, the expected income and costs associated with locating in each of the cities has been determined. The life of the warehouse is expected to be 12 years, and MARR is 15%/year. City Initial Cost Net Annual Income Lagrange $320,000 $205,000 Auburn $880,000 $35,000 Anniston $1,040,000 $455,000 a. What is the annual worth of each site
Answer:
Lagrange Annual Worth $145,966.15
Auburn Annual Worth $873,543.17
Anniston Annual Worth=$435,814
Explanation:
Calculation to determine the annual worth of each site
Using this formula
Annual worth of Project = A - P* r/(1-(1+r)^-N)
Let plug in the formula
Lagrange Annual Worth = $205,000-$320,000*15%/(1-(1+15%)^-12)
Lagrange Annual Worth = $145,966.15
Auburn Annual Worth = $880,000-$35,000*15%/(1-(1+15%)^-12)
Auburn Annual Worth=$873,543.17
Anniston Annual Worth = $455,000-$104,000*15%/(1-(1+15%)^-12)
Anniston Annual Worth=$435,814
Therefore the annual worth of each site will be :
Lagrange Annual Worth $145,966.15
Auburn Annual Worth $873,543.17
Anniston Annual Worth=$435,814
On January 1, 2019, Tonika Company issued a six-year, $10,000, 6% bond. The interest is payable annually each December 31. The issue price was $9,523 based on an 7% effective interest rate. Tonika uses the effective-interest amortization method. The December 31, 2020 book value after the December 31, 2020 interest payment was made is closest to:
Answer:
$9,590
Explanation:
Calculation to determine what The December 31, 2020 book value after the December 31, 2020 interest payment was made is closest to:
First step is to calculate the Interest paid
Interest paid = 10000*6%
Interest paid= 600
Second step is to calculate the Interest expense
Interest expense = 9,523*7%
Interest expense= 667
Third step is to calculate the Discount amortization
Discount amortization =667-600
Discount amortization = 67
Now let calculate Book value at the end of December 31,2020
Book value at the end of December 31,2020 = 9,523 +67
Book value at the end of December 31,2020 = $9,590
Therefore The December 31, 2020 book value after the December 31, 2020 interest payment was made is closest to:$9,590
At December 31, 2021, MedX Corporation had outstanding 200,000 shares of common stock. Also outstanding were 120,000 shares of preferred stock convertible into 64,000 common shares and $1,800,000 of 10% bonds convertible into 27,000 common shares. MedX's net income for the year ended December 31, 2021, is $1,040,000. The income tax rate is 25%. MedX paid dividends of $2 per share on its preferred stock during 2021. Required: Compute basic and diluted earnings per share for the year ended December 31, 2021, considering possible antidilutive effects
Answer: basic earning per share = $4.00
Diluted Earning per share = $4.04 per share
Explanation:
Based on the information given in the question, the basic and diluted earnings per share for the year ended December 31, 2021, considering possible antidilutive effects will be calculated as:
The Basic earnings per share will be calculated as:
M= (Net income - preferred dividend) / Outstanding common stock
= ($1040000 - ($120000 × 2)) / 200000
= ($1,040,000 × $240,000) / 200,000
= $800000 ) 200000
= $4.00 per share
The weighted average outstanding share for the diluted will be:
= 200,000 + 64000 + 27000
= 291,000 shares
Then, the diluted earnings per share will be:
= (1040000 + 1800000 × 10% × 75%)/291000
= $4.04 per share
A small country emits 82,000 kilotons of carbon dioxide per year. In a recent global agreement, the country agreed to cut its carbon emissions by 3.5% per year for the next 6 years. In the first year of the agreement, the country will keep its emissions at 82,000 kilotons and the emissions will decrease 3.5% in each successive year. How many total kilotons of carbon dioxide would the country emit over the course of the 6 year period, to the nearest whole number?
Answer: 450907
Explanation:
Kalamazoo Corporation's cost formula for its manufacturing overhead is $45,700 per month plus $53 per machine-hour. For the month of March, the company planned for activity of 6,200 machine-hours, but the actual level of activity was 6,150 machine-hours. The actual manufacturing overhead for the month was $373,630. The manufacturing overhead in the flexible budget for March would be closest
Answer:
$371,650
Explanation:
Use the costs formula provided to find the flexed manufacturing overhead cost for March.
A flexed budget amount is a budgeted amount adjusted to actual level of activities as follows.
Actual Activity is given as 6,150 machine-hours
Manufacturing overhead cost = $45,700 + $53 x 6,150 machine-hours
= $371,650
Therefore,
The manufacturing overhead in the flexible budget for March would be closest $371,650
ABC Corporation plans to issue new bonds to finance its expansion plans. In its efforts to price the issue, ABC Corporation has identified a company of similar risk with an outstanding bond issue that has an 8 percent coupon rate having a maturity of 10 years. This firm's bonds are currently selling for $1,091.96. If interest is paid annually for both bonds, what must the coupon rate of the new bonds be in order for the issue to sell at par
Answer:
6.71%
Explanation:
Nper = 10
PMT = ($1000*8%) = 80
PV = -1,091.96
FV = 1000
Coupon rate for new bond issue = Rate(Nper, PMT, -PV, FV)
Coupon rate for new bond issue = Rate(10, 80, -1091.96, 1000)
Coupon rate for new bond issue = 0.067082953
Coupon rate for new bond issue = 6.71%
