The note about debt included in the financial statements of Healds Company for the year ended December 31, 2017, disclosing the following:
8.15% notes due 2018 $218,400,000
8.65% notes due 2023 $362,200,000
8.90% notes due 2032 $243,000,000
8.53% notes due 2040 $218,000,000
7.45% notes due 2019 $ 26,800,000
The above table summarizes the long term debt of the company at December 31, 2017. All of the notes were originally at their face (maturity) value and have been gradually repaid over time so that these amounts are remaining balances at this date.
Assuming that the notes pay interest annually and mature on December 31 of the respective year.
(FV of $1, PV of 1, FVA of $1, PVA of $1, FVAD of $1, PVAD of $1)
Required:
Suppose that Healdsburg enters into a sales contract with an auto manufacturer on January 1, 2018, to provide tires that cost Healdsburg 19.8 million to produce. The buyer offers Healdsburg 6.90 million in cash and agrees to take over only the principal payment on Healdsburg 7.45% debt notes. Assume that the going market is 9% at the time. What would Healdsburg gross profit be on the sale?