In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures from historical book values to market values. kjm corporation's balance sheet (book values) as of today is as follows: long-term debt (bonds, at par) $23,500,000 preferred stock 2,000,000 common stock ($10 par) 10,000,000 retained earnings 4,000,000 total debt and equity $39,500,000 the bonds have a 8.3% coupon rate, payable semiannually, and a par value of $1,000. they mature exactly 10 years from today. the yield to maturity is 11%, so the bonds now sell below par. what is the current market value of the firm's debt?

$19,708,745

Explanation:

We first have to calculate the present value of the bonds:

Nper = 20 (10 years x 2 payments per year)

R = 11% / 2 = 5.5%

Payment = 83 / 2 = 41.50

Future value = 1,000

PV = ?

To calculate the present value we can use an excel spreadsheet and the present value function =PV(5.5%,20,41.5,1000) = $838.67

Now we calculate how many bonds were issued = $23,500,000 / $1,000 = 23,500 bonds.

To determine the market value of the debt outstanding we multiply the present value of the bonds times the total number of bonds outstanding

= $838.67 x 23,500 = $19,708,745

the answer should be a)

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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