PLtd finances the asset by issuing $605 par value of 12% coupons bonds to yield 10%. Interest is payable at the end of the first and second years, at which time the bonds mature. The balance of the cost of the asset is financed by the issuance of common shares.
Required:
Prepare the present value-based balance sheet as at the end of the first year. PLtd. Plans to pay no dividends in this year.
Give two reasons why ideal conditions are unlikely to hold.
If ideal conditions do not hold, but present value-based financial statements are prepared anyway, is net income likely to be the same as you calculated in part a? Explain why or why not (CGA- Canada)