October 2021

Value of a Bond
It is defined to be the present worth of all the amounts the bondholder will receive through his possession of the bond.

The bondholder will receive two types of payments which are:

1. Single payment which the owner will receive at the date of maturity of the bond, which is usually equal to the par value of the bond; and
2. The periodic payments for interest on the bond usually it is redeemed by the issuing corporations.

Formula for value of a bond:

The Philippine Institute of Civil Engineers is planning to construct its own building. Two proposals are being considered:

(a) The construction of the building now to cost PhP 400,000.00
(b) The construction of a smaller building now, to cost PhP 300,000.00 and at the end of 5 years, an extension to be added to cost PhP 200,000.00

Which proposal is more economical if interest is 20%, depreciation is disregarded and by how much?

To develop an oil well containing 2,000,000 barrels of oil required an initial investment of PhP 30,000,000.00. In a certain year, 400,000 barrels of oil were produced from this well. Determine the depletion charge during the year.

To develop an oil well containing 2,000,000 barrels of oil required an initial investment of PhP 30,000,000.00. In a certain year, 400,000 barrels of oil were produced from this well.

The total gross income of the oil company is PhP 34,000,000.00 for the particular year, and the taxable income after talking all deductions, except for depletion, is PhP 14,100,000.00. Determine the allowable depletion allowance for the year.