Sunny corporation this question solution general accounting Sunny Corporation has $3,000,000 in fixed-rate debt, with an annualinterest rate of 3.5%, and interest payments due June 30 and December31 of each year. On January 1, 2016, it entered a receive fixed/payvariable interest rate swap, where the variable rate is LIBOR. On January1, 2016, LIBOR is 3.3%. On June 30, 2016, LIBOR declines to 3.0% andcauses the variable rate to be reset at that time. The swap qualifies forhedge accounting.How much does Sunny pay or receive to settle the swap for the the6-month period ending June 30, 2016?a) $3,000 paidb) $52,500 receivedc) $49,500 paidd) $3,000 received

Step 1: Define Long-term DebtsLong-term debts refer to the amount of debt that a corporation holds…

Answered: Sunny Corporation has $3,000,000 in…

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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Janutis Co. has just issued fixed rate debt at 10 percent. Yet it prefers to convert its financing to incur a floating rate on its debt. It engages in an interest rate swap in which it swaps variable rate payments of LIBOR plus 1 percent inexchange for payments of 10 percent. The interest rates are applied to an amount that represents the principal from its recent debt issue in order to determine the interest payments due at the end of each year for the next three years. Janutis Co. expects that the LIBOR will be 9 percent at the end of the first year, 8.5 percent at the end of the second year, and 7 percent at the endof the third year. Determine the financing rate that Janutis Co. expects to pay on its debt after considering the effect of the interest rate swap.
Viserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 18 years to maturity that is quoted at 109 percent of face value. The issue makes semiannual payments and has an embedded cost of 6 percent annually. a. What is the company’s pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the tax rate is 22 percent, what is the aftertax cost of debt?
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On April 1, 2016, Lerner Corporation issued $120,000 of five-year, 10% bonds at a market (effective) interestrate of 8%. Interest is payable semiannually on April 1 and October 1What is the amount of the semi-annual interest payment?Will the bonds be issued at a discount or premium?Present Value of the Semiannual Interest PaymentInterest RateNumber of PeriodsFactorPresent Value of the Interest PaymentsPresent Value of the Bond Face AmountInterest RateNumber of PeriodsFactorPresent Value of the FaceBonds ProceedsAmount of Discount or Premium
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