Problem 6 attached is the information needed for problem 7

PROBLEM # 6: Accounting for Bonds (20 points) Billabong Inc. needed financing to build a new plant. On June 30th, 2012, Billabong issued $1,000,000 of 10-year bonds with a 10% coupon rate (payments due on December 31st and June 30th). The effective interest rate (i.e. yield) was 8%. Use the financial statement effects template below to record the bond issue and Billabong's first interest payments. PLEASE SHOW YOUR CALUCLATIONS IN EXCEL. Please use the EXCEL Sheet provided and make the appropriate adjustments for your present value calculations. Tip: The cells in Yellow need adjustments. UPLOAD THE EXCEL FILE WITH YOUR CALCULATIONS Balance Sheet Income Statement Transaction Cash Noncash Liabilities + Contrib + Earned Rev- enues - Expen- ses = Net Income Asset Assets Capital Capital Bond issue 1,000,000 135,903.26 = 1,000,000 135,903.26 Interest 12/31 50,000 50,000 - 50,000 = 50,000 Calculations Bond 1,000,000 FV of the bond $1, 135,903.26 Copupon rate 10% YTM 8% Time 10 Frequency 2 Interest 50000PROBLEM fl 7: Early Retirement of Bonds. (20 Points) Assume further that after 5 years (10 periods left), Billabong wants to buy back the bonds they issued in Problem 1). At this time interest rates have fallen to 4% and the yield equals the coupon rate. Please calculate all the relevant present values PLEASE SHOW YOUR CALUCLATIONS IN EXCEL. Please use the EXCEL Sheet provided and make the appropriate adiustments for your present value calculations. The cells in BLUE need adiustments. Answer the following questions. What would be the price of the bonds in the market at the time of repurchase? Would Billabong generate an economic gainlloss? Show the present value differential of the old vs. the new bond. Would Billabong generate an accounting gain! loss? Would you retire the bonds early? Give one reason for why and one reason for why not