2 Problem: On Jauary 1, 2016, the Auto-Stop Corporation issued bonds in the amount of...
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2 Problem: On Jauary 1, 2016, the Auto-Stop Corporation issued bonds in the amount of s10,000 that will be paid in three years. Interest of $400 is payable semiannually 3 each January 1 and July 1 with the first interest payment at the end of the period, on July 1 of the current year. Draw a time line of the bond's cash outflows. If the market rate of interest is 10%, what is the amount of the bond issue proceeds (cash received) when Auto-Stop Corporation issued the bonds? P ng400 $400 5400 5400 5401000 $10,000 $400 $400 PVOrdinary Annuity # ? $400 $400 $400 $400 t=0 1 2 3 4 5 T=6 11 | VY= 596, N= 6 13 Use PV formula in Excel (fx) to compute the PV of the cash outflows related to bond issuance Fill in the formula in ? 15 (1) PV of Single Sum 16 (2) PV of Ordinary Annuity 17 Total PV Your answers should be 7,462.15 2,030.28 9,492.43 ? 19 This should be equal to the amount ofthe bond issue proceeds (cash received)
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