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    Devry University
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Category > Business & Finance Posted 09 Dec 2017 My Price 10.00

Note 7- Bank Loans and Long-term Debt

I need help answering this question. Please also explain how to get answer.

1.  Refer to Note 7- Bank Loans and Long-term Debt. Consider the 1.76% Japanese yen bonds due 2011. Assume that Mitsubishi Electric issued these bonds on March 31, 2009.

  •  i. How much did Mitsubishi Electric Corporation receive when it issued the bonds? (Ignore issuance costs and fees)

2. Consider the 1.17% Japanese yen bonds due 2014. Assume that these bonds were issued on March 31, 2010, and mature in four years. Assume that the face value of the bond is ¥30,500 (in millions).

  • If MEC pays interest on these bonds annually, how much interest does the company pay each year?

3. Note 18 discloses the fair value of Mitsubishi Electric's financial instruments, including its long-term debt. According to paragraph (d) Long-term debt, Mitsubishi Electric calculates the fair value of its long term debt by discounting the future cash flow associated with each debt instrument at its current borrowing rate (i.e., the current market rate). In contrast, the carrying amount of debt reflected on Mitsubishi Electric's balance sheet is determined by discounting these future cash flows using the market rate at the time of the issuanceof each debt instrument.

  • i. Compare  the carrying amount and estimated fair value of Mitsubishi Electric's long-term debt at March 31, 2010. Which of these two amounts is higher? What does this  relation imply about the company's current market rate-is it higher or lower,  on average than the market rate at issuance?
  • ii. Now compare the carrying amount and estimated fair value of Mitsubishi  Electric's long-term debt at March 31, 2009. Which of these two amounts is  higher? What does this relation imply about the company's current market rate  at March 31, 2009 - is it higher or lower, on average than the market rate at  issuance?

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CourseLover
(12)
Status NEW Posted 09 Dec 2017 01:12 PM My Price 10.00

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