Question

Present Value of Bonds Payable; Discount Pinder Co. produces and sells high-quality video equipment. To finance its operations, Pinder Co. issued $25,000,000 of five-year, 7% bonds, with interest payable semiannually, at a market (effective) interest rate of 9%.

Determine the present value of the bonds payable, using the present value tables in Exhibit 8 and Exhibit 10.

Round to the nearest dollar. $

Answer 1

(note there will be slight difference in issue price calculation ,kindly use the factors as given
inn your question to get exact answer)
	Bond characterstics				Amount
1-a)	Principal				25,000,000
	interest				875,000
	Market interest rate				4.5%
	periods to maturity				10
	issue price				23,021,880	answer
	Calculation of bond issue price
	Where
	i=	4.50%
	t=	10
	principal		*	PV of $1 at 4.5% for 10 yrs =
	25,000,000		*	0.64393		=	16098250
	interest		*	PV of ordinary annuity at 4.5%=
	875000		*	7.91272		=	6923630
	bond issue price						23021880