What is the value of a new $1,000 par value bond

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 2C: One way for a corporation to accomplish long-term financing is through the issuance of long-term...
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Consider a corporation who recently filed Chapter 11 bankruptcy (reorganization). Under the reorganization, the company has been allowed to reorganize their debt structure with a consolidated new deferral bond issue with more favorable terms. The new issue will be a 38-year, 9% coupon rate bond with semiannual coupons. However, under the bond indenture, the company is relieved of making interest payments (deferred interest) for the first 7 years. The reorganization calls for the deferred interest to be paid in a single payment at maturity. Investors are demanding a yield to maturity of 9%. What is the value of a new $1,000 par value bond?

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