Problem+14.7rewritten - Situation 2 The market rate of...

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Problem 14.7 (Rewritten so that you can use the tables) Larkins is planning to issue debentures with a face value of $20,000,000 on September 1, 2008.  The debentures mature in 10 years and have a face rate of interest of 8% that is paid semi- annually on March 1 and September 1 of each year. Larkins is uncertain about what the market  rate of interest will be on those dates and has projected the following possibilities: Situation 1: The market rate of interest is 10%.
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Unformatted text preview: Situation 2: The market rate of interest is 6%. Situation 3: The market rate of interest is 8%. Required: A: How much cash will Larkins receive from the debentures for each interest rate? B: What is the interest expense for the first year for each of the market interest rates? C: What annual cash outflows will occur for each of the market interest rates? D: How did the carrying value change each year under each scenario?...
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