Answered: Calculate the cash flows the purchaser…

Business

Accounting

Calculate the cash flows the purchaser of the bonds (

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Krystian Inc. issued 8-year bonds with a face value of $130,000 and a stated rate of 3% when the market face was 5%. Interest was paid semi-annually.

A. Calculate the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term.

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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