On January 2, 2007, Yenn Corporation Wishes to Issue $2,000,000

question 83

Multiple Choice

On January 2, 2007, Yenn Corporation wishes to issue $2,000,000 (par value) of its 8%, 10-year bonds.The bonds pay interest annually on January 1.The current yield rate on such bonds is 10%.Using the interest factors below, compute the amount that Yenn will realize from the sale (issuance) of the bonds. $\begin{array} { l } \text {Present value of 1 at \( 8 \% \) for 10 periods }&0.4632\\ \text {Present value of 1 at \( 10 \% \) for 10 periods }&0.3855\\ \text { Present value of an ordinary annuity at \( 8 \% \) for 10 periods }&6.7101\\ \text { Present value of an ordinary annuity at \( 10 \% \) for 10 periods}&6.1446\\\end{array}$

• A)$2,000,000
• B)$1,754,136
• C)$2,000,012
• D)$2,212,052

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Definitions:

Capital Intensity Ratio

A financial metric that measures the amount of capital needed per dollar of revenue; used to evaluate the investment intensity of a business's operations.

Fixed Asset Turnover Ratio

A financial metric that measures how efficiently a company uses its fixed assets to generate sales, calculated by dividing net sales by average fixed assets.

Capital Intensity Ratio

This ratio measures a company's investment in physical assets relative to its labor costs, indicating how much capital is used in the production process.

External Financing Needed

The amount of funding that a company must seek from external sources to finance its planned activities or investments, beyond what it can generate internally.