Tutor profile: Victoria N.
If a bond has a face value of $100,000 and a coupon rate of 8%, while paying coupons semi annually until the maturity date in 7 years, would would be the selling price of this bond today given that the market rate is 6%?
This question is asking us for the present value of the bond today, because we know the future value is $100,000. We are going to use a financial calculator to solve this. We would want to solve for "PV", so in order to do this we are first going to find the annuity or coupon payment. We are going to use the coupon rate of 8% divided by 2 because it is semi annual and 8% is a yearly rate. After that we are going to take 4% and multiply it by the face value of $100,000 to find an annuity of 4000 every six months. After this, we will plug that in as the "PMT" in the financial calculator, after that we are going to put "3" for the I/y (Which is 6%/2 because it is semi annual) and then 100,00 as the FV because that is the amount we expect to receive at the end of the maturity date. Lastly, the "N" will be equal to 14 (7*2 because it is semi annual so we have to double the periods) after we have plugged everything in, we are going to hit "CPT" and then "PV" and that will give us the PV of the bond.
If a company bought $52,000 worth of machinery and paid half in cash, and the remaining with with a note payable, what would the journal entry look like?
Since the machinery is an asset, we have an asset going up which is going to be a debit. Our first part of the journal entry would to debit machinery for the full $52,000. Next, we would move onto crediting both cash and notes payable. We would credit cash for $26,000 and it is a credit because it is an asset decreasing. Our journal entry is still not balanced, our second credit would be a credit to notes payable because notes payable is a liability that we are increasing. We are liable to pay the note back at a later date.
What would you recommend to a struggling company that is having a hard time entering into the e-Commerce market?
I would first want to look at how the company is doing right now, and see if they have room for growth first of all. After looking, and seeing how they are doing in their brick and mortar store, if it seems the time is right, I would want to look into hiring someone to manage their website. This may scare some small business owners, however I would explain that a little bit of debt for a high return is worth it. Our digital age is moving in the trend of online shopping and retail, so while the debt may seem scary at first to hire someone to manage the e-Commerce side, the payout will be huge just because that is the way people are starting to shop in general.
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