Boston Scientific discloses the following as part of its long-term debt footnote in its December 31,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Boston Scientific discloses the following as part of its long-term debt footnote in its December 31, 2018 10-K. Borrowings and Credit Agreements In millions, except interest rates January 2020 Notes.. May 2020 Notes... May 2022 Notes.. October 2023 Notes. May 2025 Notes... March 2028 Notes. November 2035 Notes(¹).. January 2040 Notes.... December 2009 Unamortized debt insurance discount and deferred financing cost..... Unamortized gain on fair value hedge. Capital lease obligation .. Long-term debt........ Issuance Date December 2009 May 2015 May 2015 August 2013 May 2015 February 2018 November 2005 In millions Maturity Date January 2020 May 2020 May 2022 October 2023 2019.. 2020.. 2021.. 2022.. 2023.. Thereafter. May 2025 March 2028 November 2035 January 2040 2020-2040 2020-2025 Various As of December 31, 2017 $ 850 600 500 450 750 2018 $ 850 600 500 450 750 1,000 350 300 (29) 26 6 $4,803 350 300 (24) 38 1 $3,815 (1) Corporate credit rating improvements may result in a decrease in the adjusted interest rate on our November 2035 Notes to the extent that our lowest credit rating is above BBB- or Baa3. The interest rates on our November 2035 notes will be permanently reinstated to the issuance rate if the lowest credit ratings assigned to these senior notes is either A- or A3 or higher. Boston Scientific discloses its required principal debt repayments due during each of the next five years and thereafter. Semi-annual Coupon Rate $2,248 1,540 6.000% 2.850% 3.375% 4.125% 3.850% 4.000% 7.000% 7.375% 0 500 450 2,400 Boston Scientific also discloses the following information. Interest Expense The following table provides a summary of our Interest expense and average bor- rowing rate: Year Ended December 31 (in millions) Interest expense.... Weighted average borrowing rate Cash paid for interest..... Maturity date Coupon 4.00% 2028... 2023. 4.125% .... The price of Boston Scientific's bonds in February 2019 follows. Current Price 2018 $(241) 109.35 101.57 3.6% $(262) Current Yield 2.80% 2.41% 2017 $(229) 3.8% 2016 $(233) 4.0% $(235) $(233) Moody's Rating (02/21/2019) Baa2 Baa2 Required a. What amount of Boston Scientific's long-term debt is due in 2019? b. What is the total amount of Boston Scientific's long-term debt at December 31, 2018, including the current maturities? c. The company's balance sheet reports short-term debt including current maturities of $2,253 million and $1,801 million in 2018 and 2017, respectively. Compute the average effective interest rate on the company's total debt for fiscal 2018. Compare this to the average interest rate the company reports. d. Explain how the amount of cash paid for interest can differ from the amount of interest expense re- corded in the income statement. e. The $1,000 million 4.00% note due in 2028 is priced at 109.35 (109.35% of face value, or $1,093.50 million) as of early 2019, resulting in a current yield of 2.8%. Assuming that the company's credit rating has not changed since the bond was issued, what does the pricing of this 4.00% bond imply about interest rate changes since Boston Scientific issued the bond? f. Compare the bonds that mature in 2023 and 2028. Explain why the bond with the higher coupon rate (4.125%) has the lower yield (2.41%). Boston Scientific discloses the following as part of its long-term debt footnote in its December 31, 2018 10-K. Borrowings and Credit Agreements In millions, except interest rates January 2020 Notes.. May 2020 Notes... May 2022 Notes.. October 2023 Notes. May 2025 Notes... March 2028 Notes. November 2035 Notes(¹).. January 2040 Notes.... December 2009 Unamortized debt insurance discount and deferred financing cost..... Unamortized gain on fair value hedge. Capital lease obligation .. Long-term debt........ Issuance Date December 2009 May 2015 May 2015 August 2013 May 2015 February 2018 November 2005 In millions Maturity Date January 2020 May 2020 May 2022 October 2023 2019.. 2020.. 2021.. 2022.. 2023.. Thereafter. May 2025 March 2028 November 2035 January 2040 2020-2040 2020-2025 Various As of December 31, 2017 $ 850 600 500 450 750 2018 $ 850 600 500 450 750 1,000 350 300 (29) 26 6 $4,803 350 300 (24) 38 1 $3,815 (1) Corporate credit rating improvements may result in a decrease in the adjusted interest rate on our November 2035 Notes to the extent that our lowest credit rating is above BBB- or Baa3. The interest rates on our November 2035 notes will be permanently reinstated to the issuance rate if the lowest credit ratings assigned to these senior notes is either A- or A3 or higher. Boston Scientific discloses its required principal debt repayments due during each of the next five years and thereafter. Semi-annual Coupon Rate $2,248 1,540 6.000% 2.850% 3.375% 4.125% 3.850% 4.000% 7.000% 7.375% 0 500 450 2,400 Boston Scientific also discloses the following information. Interest Expense The following table provides a summary of our Interest expense and average bor- rowing rate: Year Ended December 31 (in millions) Interest expense.... Weighted average borrowing rate Cash paid for interest..... Maturity date Coupon 4.00% 2028... 2023. 4.125% .... The price of Boston Scientific's bonds in February 2019 follows. Current Price 2018 $(241) 109.35 101.57 3.6% $(262) Current Yield 2.80% 2.41% 2017 $(229) 3.8% 2016 $(233) 4.0% $(235) $(233) Moody's Rating (02/21/2019) Baa2 Baa2 Required a. What amount of Boston Scientific's long-term debt is due in 2019? b. What is the total amount of Boston Scientific's long-term debt at December 31, 2018, including the current maturities? c. The company's balance sheet reports short-term debt including current maturities of $2,253 million and $1,801 million in 2018 and 2017, respectively. Compute the average effective interest rate on the company's total debt for fiscal 2018. Compare this to the average interest rate the company reports. d. Explain how the amount of cash paid for interest can differ from the amount of interest expense re- corded in the income statement. e. The $1,000 million 4.00% note due in 2028 is priced at 109.35 (109.35% of face value, or $1,093.50 million) as of early 2019, resulting in a current yield of 2.8%. Assuming that the company's credit rating has not changed since the bond was issued, what does the pricing of this 4.00% bond imply about interest rate changes since Boston Scientific issued the bond? f. Compare the bonds that mature in 2023 and 2028. Explain why the bond with the higher coupon rate (4.125%) has the lower yield (2.41%).
Expert Answer:
Answer rating: 100% (QA)
a The amount of Boston Scientifics longterm debt due in 2019 can be calculated by summing up the principal debt repayments due in that year According to the information provided the principal debt rep... View the full answer
Related Book For
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
Posted Date:
Students also viewed these accounting questions
-
History Modine was incorporated under the laws of the State of Wisconsin on June 23, 1916 by its founder, Arthur B. Modine. Mr. Modine's "Turbotube" radiators became Standard equipment on the famous...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Discuss the ways that managed care organizations can infl uence the adoption of new technologies.
-
At the end of 2007, Rowet Company reported a deferred tax liability of $6,120 based on an income tax rate of 30%. On June 1, 2008 Congress changed the income tax rate to 35%. Required 1. Calculate...
-
The expression f(x + h) f(x) is frequently used in the study of calculus. Determine and then simplify this expression for the given functions. f(x) = 2 x + 4
-
Air at standard temperature and pressure flows at a rate of 7.0 cfs through a horizontal, galvanized iron duct that has a rectangular cross-sectional shape of 12 in. by 6 in. Estimate the pressure...
-
Wallis Car Wash, Inc., expected to wash 2,000 cars during the month of August. Washing each car was expected to require 0.2 hours of labor. The company actually used 420 hours of labor to wash 1,880...
-
A six - cylinder 4 - stroke cycle petrol engine is to be designed to develop 3 2 0 kW of ( b . p ) at 2 6 0 0 rpm , the bore / stroke ratio is to be 1 : 1 . 3 . Assuming the mechanical efficiency is...
-
Two radio transmitters positioned 300 mi apart along the shore send simultaneous signals to a ship that is 200 mi offshore, sailing parallel to the shoreline. The signal from transmitter S reaches...
-
Please help explain why the under-listed two forces of porter fives are essential in a plant-based industry The threat of new entrants and The intensity of competitive rivalry. Please, in your...
-
What opportunities might FinTech offer for green finance?
-
How else might finance help to encourage energy efficiency?
-
Branding distinguishes one company's goods or services from those of its competitors. Each company you purchase from hopes that you will become loyal to its brand. Some well-known brands are Amazon,...
-
With renewable energy set to grow further in the coming years, what more could insurance firms do to encourage take up?
-
Can you think of any emerging trends that may open up more opportunities for motor insurers to promote environmental sustainability
-
If the cost of a paint can varies directly with the number of paint cans purchased and two cans of paint cost 10.50. Write an equation in direct variation for the total cost of any amount of paint...
-
What is the back work ratio? What are typical back work ratio values for gas-turbine engines?
-
Prepare the necessary adjusting entries for Johnstone Controls at the end of its December 31, 2018, fiscal yearend for each of the following situations. No adjusting entries were recorded during the...
-
Comparative statements of retained earnings for Renn-Dever Corporation were reported in its 2018 annual report as follows. At December 31, 2015, common shares consisted of the following: Common...
-
On May 1, 2018, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $10 million. Additional costs and purchases...
-
If sand from gravel pit 1 is used, then molten glass for producing armored glass has a random impurity content \(X\) which is \(N(60,16)\)-distributed. But if sand from gravel pit 2 is used, then...
-
The total monthly sick leave time of employees of a small company has a normal distribution with mean 100 hours and standard deviation 20 hours. (1) What is the probability that the total monthly...
-
Let \(X\) have a geometric distribution with \[P(X=i)=(1-p) p^{i} ; \quad i=0,1, \ldots ; 0
Study smarter with the SolutionInn App