Moore Industries Manufactures Exercise Equipment

question 9

Multiple Choice

Moore Industries manufactures exercise 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 exercise equipment.After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $2,000,000 of 11% bonds on March 1, 2010, due on March 1, 2025, with interest payable each March 1 and September 1.At the time of issuance, the market interest rate for similar financial instruments is 10%.What is the selling price of the bonds?

• A)$2,220,000
• B)$1,269,776
• C)$2,153,730
• D)$1,690,970

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Definitions:

Pricing Strategy

An approach businesses use to set the prices for their products or services, based on costs, market demand, competition, and other factors.

Marginal Revenue

The change in total revenue that results from selling one additional unit of product.

Robinson-Patman Act

A United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination.

Sellers

Individuals or entities that offer products or services for sale.