How much cash will the company receive when issuing bonds?

Question:

When a company issues bonds, how is the amount of cash determined?

Answer:

When a company issues bonds, it receives cash from investors in exchange for the bonds. The amount of cash that the company will receive is calculated based on the face value of the bonds, the issue price, and any associated costs.

When a company issues bonds, it receives cash from investors in exchange for the bonds. The amount of cash that the company will receive is calculated based on the face value of the bonds, the issue price, and any associated costs. In this case, if a company issues $200,000 of bonds at 101.5, the face value of the bonds is $200,000, and the issue price is 101.5% of the face value.

To calculate the amount of cash that the company will receive, we need to multiply the face value by the issue price percentage and convert it into a decimal:

Cash Received = Face Value x Issue Price Percentage

Cash Received = $200,000 x 101.5% / 100

Cash Received = $200,000 x 1.015

Cash Received = $203,000

Therefore, the company will receive $203,000 in cash from the issuance of the bonds.