SOLUTION: Topics In Contemporary Math 21: Simple Interest 5) To fund the construction of a new Watchtower, Wayne enterprises sold $100 million of 12% bonds that mature in 5 years an

Question 1193716: Topics In Contemporary Math
21: Simple Interest
5) To fund the construction of a new Watchtower, Wayne enterprises sold $100 million of 12% bonds that mature in 5 years and pay coupons monthly. What is the total cost of the new Watchtower space station?
Answer by proyaop(69) (Show Source): You can put this solution on YOUR website!
* **Determine the monthly coupon payment:**
* Annual coupon payment = Coupon rate * Face value
= 0.12 * $100,000,000
= $12,000,000
* Monthly coupon payment = $12,000,000 / 12 months
= $1,000,000
* **The total cost of the Watchtower space station is NOT directly related to the amount of bonds issued.**
* **Key Points:**
* The $100 million bond issue is a method of financing the construction, not the total cost itself.
* The actual cost of the Watchtower could be significantly higher or lower than $100 million depending on various factors like:
* Design and complexity of the space station
* Materials used in construction
* Labor costs
* Research and development costs
* Unexpected challenges or delays during construction
* Profit margins for the construction companies involved
**In summary:**
* The question provides information about how Wayne Enterprises is financing a portion of the Watchtower's construction (by issuing bonds), but it does not provide enough information to determine the total cost of the project.

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