Answer:
$864,884
Explanation:
The proceeds received from the issuance of bonds equal the sum of the present value of the cash flows associated with the bonds (both the face amount and interest payments) discounted at the interest rate prevailing in the market at the time. The present value of the $800,000 face amount discounted at the market interest rate of 8% is equal to $540,448 ($800,000 × .67556). The present value of the semiannual interest payments of $40,000 [$800,000 × 10% × (6 months ÷ 12 months)] discounted at the market interest rate of 8% is equal to $324,436 ($40,000 × 8.11090). Thus, the proceeds on the sale of the bonds equal $864,884 ($540,448 + $324,436).
