Question

Exhibits 10-10A and B contain excerpts from the University of Toronto’s annual report for its 2012/13 fiscal year.
EXHIBIT 10-10B EXCERPT FROM UNIVERSITY OF TORONTO’S 2012/13 ANNUAL REPORT
On December 7, 2011, the University issued Series E senior unsecured debenture in the aggregate principal amount of $100.0 million at a unit price of $1,000 for proceeds of $100.0 million. On February 7, 2012, the University issued additional Series E senior unsecured debenture in the aggregate principal amount of $100.0 million at a unit price of $1,026 for proceeds of $102.6 million. The debenture bears interest at 4.251%, which is payable semi-annually on June 7 and December 7, with the principal amount to be repaid on December 7, 2051. To date, the University has spent $91.7 million of the proceeds on capital assets.
Required:
a. Refer to Note 11 in Exhibit 10-10B. Explain what it means when it states that the Series E debentures are “senior unsecured debentures”?
b. How much cash did the university raise through the two issuances of series E debentures? How does this compare with the face value of these debentures?
c. At what amount are these debentures carried on the University of Toronto’s balance sheet (statement of financial position) in Exhibit 10-10A? Explain the amount these debentures will be carried at just prior to their maturing in 2051.
d. Note 11 states that the debentures bear interest at 4.251%, but given the amount that the university received at the time of issuance, will their interest costs be more, less, or equal to this rate?


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  • CreatedJune 12, 2015
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