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Calculating the Fair Value of Debt The Longo Corporation issued $60 million maturity value in notes, carrying...

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Accounting

Calculating the Fair Value of Debt

The Longo Corporation issued $60 million maturity value innotes, carrying a coupon rate of six percent, with interest paidsemiannually. At the time of the note issue, equivalent risk-rateddebt instruments carried yield rates of eight percent.

The notes matured in five years.


Calculate the proceeds that Longo Corporation will receive from thesale of the notes.
Round your answer to the nearest dollar.

$Answer


How will the notes be disclosed on Longo’s balance sheetimmediately following the sale?
Round your answers to the nearest dollar.

Notes payable$Answer
Less discount (enter asnegative)$Answer
Notes payable (net)$Answer


Calculate the interest expense for Longo Corporation for the firstyear that the notes are outstanding.
Do not round until final answer. Round answers to the nearestdollar.

First six months$Answer
Second six months$Answer


Calculate the balance sheet value of the notes at the end of thefirst year.
Do not round until final answer. Round answer to the nearestdollar.

$Answer

Answer & Explanation Solved by verified expert
4.3 Ratings (770 Votes)
Answer aMaturity Value 60000000Annual Coupon Rate 6Semiannual Coupon Rate 3Semiannual Coupon 3 60000000Semiannual Coupon 1800000Time to Maturity 5 yearsSemiannual Period to Maturity    See Answer
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