Goo Goo Enterprises invested in the bonds of Greater Glouster. These bonds pay interest of​ 2%. The effective rate of interest for similar bonds on the date of investment was​ 6%. Did Goo Goo purchase the bonds at a discount or​ premium? A. These bonds were purchased at a premium because the stated rate exceeds the market rate. B. These bonds were purchased at a premium because the market rate exceeds the stated rate. C. These bonds were purchased at a discount because the stated rate exceeds the market rate. D. These bonds were purchased at a discount because the market rate exceeds the stated rate.

Alpha industries is considering a project with an initial cost of $8 million. the project will produce cash inflows of $1.49 million per year for 8 years. the project has the same risk as the firm. the firm has a pretax cost of debt of 5.61 percent and a cost of equity of 11.27 percent. the debt–equity ratio is .60 and the tax rate is 35 percent. what is the net present value of the project?

Mae jong corp. issues $1,000,000 of 10% bonds payable which may be converted into 10,000 shares of $2 par value ordinary shares. the market rate of interest on similar bonds is 12%. interest is payable annually on december 31, and the bonds were issued for total proceeds of $1,000,000. in accounting for these bonds, mae jong corp. will: (a) first assign a value to the equity component, then determine the liability component. (b) assign no value to the equity component since the conversion privilege is not separable from the bond.(c) first assign a value to the liability component based on the face amount of the bond.(d) use the “with-and-without” method to value the compound instrument.

Reagan corporation is a wholesale distributor of truck replacement parts. initial amounts taken from reagan's records are as follows: