Finance Answers

The following data was extracted from the marketing department in relation to the sales made after carrying out a number of promotions and fixing different prices.
Sales sh ‘millions’ 4 6 7 9 13 15
No of promotions 15 12 8 6 4 8
Selling price 30 24 20 14 10 4
i. Determine the equation of sales in relation to the number of promotions and price
ii. Determine the sales when the price is set at Sh 40 and the number of promotions is set at 10.

2.6 (6 points) Recently, Midrand Hospitals Inc. filed for bankruptcy. The firm was reorganized as American Hospitals Inc., and the court permitted a new indenture on an outstanding bond issue to be put into effect. The issue has 10 years to maturity and a coupon rate of 10 percent, paid annually. The new agreement allows the firm to pay no interest for 5 years. Then, interest payments will be resumed for the next 5 years. Finally, at maturity (Year 10), the principal plus the interest that was not paid during the first 5 years will be paid. However, no interest will be paid on the deferred interest. If the required annual return is 20 percent, what should the bonds sell for in the market today

2.5 (6 points) Marie Snell recently inherited some bonds (face value R100 000) from her father, and soon thereafter she became engaged to Sam Spade, a University of Florida marketing graduate. Sam wants Marie to cash in the bonds so the two of them can use the money to "live like royalty" for two years in Monte Carlo. The 2 percent annual coupon bonds mature on January 1, 2024, and it is now January 1, 2004. Interest on these bonds is paid annually on December 31 of each year, and new annual coupon bonds with similar risk and maturity are currently yielding 12 percent. If Marie sells her bonds now and puts the proceeds into an account which pays 10 percent compounded annually, what would be the largest equal annual amounts she could withdraw for two years, beginning today

2.3 You have been provided with the following options.
a. A 10-year, R1000 face value, 10 percent coupon bond with semiannual interest payments.
b. A 10-year, R1000 face value, 10 percent coupon bond with annual interest payments.
c. A 10-year, R1000 face value, zero coupon bond. d. A 10-year R100 annuity.
(3 points) Determine which one poses the highest price risk.

4 points) How does the equation for valuing a bond change if semiannual payments are made? Find the value of a 10-year, semiannual payment, 10 percent coupon bond if nominal rd = 13%.
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Question
Asked Sep 7, 2020
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(4 points) How does the equation for valuing a bond change if semiannual payments are made? Find the value of a 10-year, semiannual payment, 10 percent coupon bond if nominal rd = 13%.
2.2 Suppose a 10-year, 10 percent, semiannual coupon bond with a par value of R1 000 is currently selling for R1 135.90, producing a nominal yield to maturity of 8 percent. However, the bond can be called after 5 years for a price of R1 050.
i) (3 points) What is the bond’s nominal yield to call?
ii) (2 points) If you bought this bond, do you think you would be more likely to earn the
YTM or the YTC? Why?

You are looking into an investment that will pay you ZMW 12, 000 per year for the next 10 years. If you require a 15 percent at a return, what is the most you would pay for this investment?

How does the equation for valuing a bond change if semiannual payments are made? Find the value of a 10-year, semiannual payment, 10 percent coupon bond if nominal rd =13

Grant Limited recognised the following assets and liabilities in its financial statements at 30 June 2019:
Carrying amount Fair value
Property, plant and equipment
Inventory
Long term loan
Accounts payable 8 500 000
4 200 000
(3 500 000)
(1 650 000) 12 000 000
4 400 000
(3 500 000)
(1 650 000)
R7 550 000 R11 250 000

The current market interest rate for similar transactions is 8,5% per annum.
Scenario 1
Phakama Limited resolved to acquire all the assets and liabilities of Grant Limited on 1 July 2019, and agreed to pay R12 800 000 in cash on 1 July 2020 in full settlement of the acquisition.

Required:

Prepare the journal entries required in the records of Phakama Limited, relating to this transaction and the subsequent payment of the purchase consideration.