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6-13 (Computation of Bond Liability) Messier Inc. manufactures

cycling equipment. Recently, the

vice president of operations of the company has requested construction of a new plant to meet the

increasing demand for the company's bikes. After a careful evaluation of the request, the board of

directors has decided to raise funds for the new plant by issuing $3,000,000 of 11

%

term corporate

bonds on March I, 2012, due on March 1,2027, with interest payable each March 1 and September 1.

At the time of issuance, the market interest rate for similar financial instruments is 10%.

As the controller of the company, determine the selling price of the bonds.

Formula for the interest payments:

PV - OA = R (PVF - OA

n, i

)

PV - OA = $165,000 (PVF - OA

30, 5%

)

PV - OA = $165,000 (15.37245


Where does the $165,000 amount come from?

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Semi annual... View the full answer

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