Due to a Number of Lawsuits Related to Toxic Wastes

question 99

Multiple Choice

Due to a number of lawsuits related to toxic wastes, a major chemical manufacturer has recently experienced a market reevaluation.The firm has a bond issue outstanding with 15 years to maturity and a coupon rate of 8 percent, with interest being paid semi-annually.The required simple rate on this debt has now risen to 16 percent.What is the current value of this bond?

• A) R1,273
• B) R1,000
• C) R7,783
• D) R550
• E) R450

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Definitions:

Opportunity Cost

The value of the best alternative that is foregone when a particular decision is made.

Transfer Price

The price at which divisions of a company transact with each other, such as the trade of supplies or labor between departments.

Valve Division

A specialized department within a company that focuses on the production and sales of valve-related products.

Pump Division

A specialized section within a company focusing on producing and managing pump-related products and services.