13-1 The initial proceeds per bond the size of the issue the initial maturity of the bond and the years remaining to maturity are shown in the following
table for a number of bonds. In each case the firm is in the 40 percent tax bracket and the bond has a $1000 par value.
Bond Proceeds per Size of Initial Maturity Years Remaining
Bond Issue of Bond to Maturity
A $985 10000 bonds 20 Years 15 years
B 1025 20000 25 16
C 1000 22500 12 9
D 960 5000 25 15
E 1035 10000 30 16
A. Indicate whether each bond was sold at a discount at a premium or at its par value.
B. Determine the total discount or premium for each issue.
C. Determine the annual amount of discount or premium amortized for each bond.
D. Calculate the unamortized discount or premium for each bond.
E. Determine the after-tax cash flow from the unamortized discount associated with the retirement now of each of these bonds using the values developed in