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Robbins Petroleum Company is five years in arrears on cumulative preferred stock dividends. There are...

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Accounting

Robbins Petroleum Company is five years in arrears on cumulative preferred stock dividends. There are 650,000 preferred shares outstanding, and the annual dividend is $5.50 per share. The Vice-President of Finance sees no real hope of paying the dividends in arrears. She is devising a plan to compensate the preferred stockholders for 80 percent of the dividends in arrears.

How much should the compensation be?

Note: Do not round intermediate calculations. Input your answer in dollars, not millions (e.g. $1,234,000).

Robbins will compensate the preferred stockholders in the form of bonds paying 12 percent interest in a market environment in which the going rate of interest is 16 percent for similar bonds. The bonds will have a 15-year maturity. Using the bond valuation Table 16-2, indicate the market value of a $1,000 par value bond.

Note: Round your answer to the nearest whole number.

Based on market value, how many bonds must be issued to provide the compensation determined in part a?

Note: Do not round intermediate calculations and round your answer to the nearest whole number.

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