At the conclusion of the tenth year, you will get the $1,000,000 principle. Your organization is granted a credit rating every year that runs from AAA (excellent) to D (poor) (worst). Ratings are calculated in Capstone by comparing current debt interest rates to the prime rate. Are you looking for Perfect Capsim Finance Handling Help? Worry no more! We got you covered!
The interest rate on new bonds will be 1.4 percent higher than the existing debt interest rate. The bond rate would be 13.5 percent if your existing loan interest rate was 12.1 percent.
You have the option to purchase back existing bonds before they mature. There is a brokerage fee of 1.5 percent. These bonds are repurchased at their current year’s market value or street price on January 1st. The amount of interest paid on the bond and your creditworthiness influence the street price. As a result, it differs from the bond’s face value. You make a profit on the buyback if you buy back bonds at a lower street price than the face value. This will result in a negative write-off on the balance sheet.
The order in which bonds were issued determines the order in which they are retired. The oldest bonds are the first to mature. Bonds that are allowed to mature to their full maturity date have no brokerage costs. If a bond is not paid off before the end of the year, your lender will give you current debt to pay off the bond principle. The bond is effectively converted to current debt as a result of this action. This sum is added to any other current debt due at the start of the next year.
When Bonds Expire: Assume bond 12.6S2011 has a face value of $1,000,000. The payback of $1,000,000 is noted in the following way in your reports and spreadsheets: Your annual reports dated December 31, 2011 show a $1,000,000 rise in current debt offset by a $1,000,000.00 drop in long-term debt.
Because you’re making judgments on January 1, 2011, while the bond is still valid, the bond will be listed in the 2011 spreadsheet. Your 2012 spreadsheet would show a $1,000,000 rise in current debt and a $1,000,000 increase in future debt.
Bond is no longer visible.
When Bonds Are Retired Early: Due to interest rate variations and your credit quality, a bond with a face amount of $10,000,000 might cost $11,000,000 to repurchase. There is a brokerage fee of 1.5 percent. In the income statement’s fees and write-offs, the difference between the face value and the repurchase price will be shown as a gain or loss.
Bond Ratings: An AAA bond rating is given to a corporation that has no debt at all. Your present debt interest rates rise when your debt-to-assets ratio rises. For every 0.5 percent increase in current debt interest, your bond rating drops one category. If the prime rate is 10% and your current debt interest rate is 10.5 percent, you will be assigned an AA bond rating rather than a AAA.
The current market price is used to conduct stock issuance operations. When your firm issues shares, it pays a brokerage cost of 5%. In that year, new stock issuance are limited to 20% of your company’s outstanding shares.
Stock issuance are often used to support long-term investments in capacity and automation. The price of a stock is determined by its book value, earnings per share (EPS), and yearly dividend paid in the previous two years.
Equity divided by the number of shares outstanding equals book value. The common stock and retained profits values on the balance sheet are referred to as equity. The number of shares outstanding refers to the total number of shares that have been issued. For example, if the company’s equity is $50 million and there are 2,000,000 shares outstanding, the book value per share is $25.00. The earnings per share (EPS) is derived by dividing net profit by the number of shares outstanding.
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