You oversee controlling debt payments in your company. You notice that there are three payments due: one
Question:
You oversee controlling debt payments in your company. You notice that there are three payments due: one of $18 million in month No. 4, another of $39 million in month No. 10, and the last of $40 million in month No. 15. At the same time, he notes that there is a cash surplus of $20 million tied up. He proposes to his manager that they renegotiate the debt, paying all the cash surplus in two more months, and the rest in four installments in months N4, N6, N8 and N10, which should increase by 10% each time. The market interest rate is 14.5% effective. The frequency to be used will be monthly. Calculate the nominal annual rate convertible monthly, and the value of each of the four payments. Use a focal date in month N15.
Intermediate Accounting
ISBN: 978-1118300855
10th Canadian Edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy