Blanding Company Issues $1,000,000 of 8%,10-Year Bonds at 98 on February

question 34

Multiple Choice

Blanding Company issues $1,000,000 of 8%,10-year bonds at 98 on February 28,2012.The bond pays interest on February 28 and August 31.The market rate of interest on the issuance date was 10%.On August 31,2012,how much cash did Blanding pay out to bondholders?

• A) $41,000
• B) $40,000
• C) $80,000
• D) $39,000

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Definitions:

WACC

A measure of a firm's blended cost of capital across all sources, including equity and debt.

NPV

Net Present Value is the calculation used to determine the value of future cash flows in today's dollars, subtracting the initial investment.

Multiple IRRs

Situations where a project or investment has more than one internal rate of return, occurring with alternating cash flows (positive and negative).

Cash Flows

Cash flow is the net amount of cash being transferred into and out of a business, considered essential for its operation, liquidity, and financial health.