J. Now compute these: a. The difference between the cash interest payment each period for the original bonds and the newly issued bonds. Is this a savings or more cost? b. What would be the present value of the difference in the cash interest payments? c. What is the difference in the maturity amounts between the original bonds and the newly issued bonds? Is this a savings or more cost? d. What is the present value of the difference in the maturity amounts? e. K. So is there any real economic gain or loss from early redemption of debt? How do we find the gain or loss on early extinguishment of debt? Does this remind you of other gains or losses were computed this semester? So how should these gains and losses be interpreted? What concept drives why we have the gain or loss? L. NOW consider this: What is the difference between the total interest EXRENSE (not the cash flows) left on the old bonds and the total interest expense for the new bonds? (this is not discounted) M. Would this difference be recorded under GAAP? | J. Now compute these: a. The difference between the cash interest payment each period for the original bonds and the newly issued bonds. Is this a savings or more cost? b. What would be the present value of the difference in the cash interest payments? c. What is the difference in the maturity amounts between the original bonds and the newly issued bonds? Is this a savings or more cost? d. What is the present value of the difference in the maturity amounts? e. K. So is there any real economic gain or loss from early redemption of debt? How do we find the gain or loss on early extinguishment of debt? Does this remind you of other gains or losses were computed this semester? So how should these gains and losses be interpreted? What concept drives why we have the gain or loss? L. NOW consider this: What is the difference between the total interest EXRENSE (not the cash flows) left on the old bonds and the total interest expense for the new bonds? (this is not discounted) M. Would this difference be recorded under GAAP? |