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Whichof the given choice has the lower present value

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Reference no: EM131534667

Question: 1. Suppose a company has an option to pay either

(a) $10,000 after one year or

(b) $5,000 after six months and another $5,000 after one year. Which choice has the lower present value?

2. On July 1, 2011, Jackson Company exercises a $5,000 call option (plus par value) on its outstanding bonds that have a carrying value of $208,000 and par value of $200,000. The company exercises the call option after the semiannual interest is paid on June 30, 2011. Record the entry to retire the bonds.

Reference no: EM131534667

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