Question: Paul Dirac & Associates begin operations on 1/1/X1 by issuing a 3.00 year term (Bullet) bond with a par value of $3,600,000. The bond pays

Paul Dirac & Associates begin operations on 1/1/X1 by issuing a 3.00 year term (Bullet) bond with a par value of $3,600,000. The bond pays interest semiannually. On the date of issuance, the annual coupon rate of the bond is 5.000% while the annual required rate of return in the debt capital markets (the discount rate) is 6.250%. Dirac assumes that he will earn $1,500,000 in cash revenues and incur cash operating expenses of 45.000% of revenues each 6 month period for the next 3.00 fiscal years. The corporate tax rate is assumed to be 21.00%.

1) Create an amortization table for the Bond.

2) What is the Price of the bond? What is the Value of any discount or premium?

3) Provide all journal entries and T-accounts for this transaction over the next 3 years.

4) Based on the information in the problem, create semi-annual pro-forma financial statements (I/S, SRE, B/S) for Dirac & Associates for the next 3 years (6 Semi-annual periods).

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