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liq [111]
3 years ago
9

Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.50 percent, a par value of $1,000 pe

r bond, matures in 8 years, has a total face value of $3.6 million, and is quoted at 109 percent of face value. The second issue has a coupon rate of 5.94 percent, a par value of $2,000 per bond, matures in 21 years, has a total face value of $7.9 million, and is quoted at 95 percent of face value. Both bonds pay interest semiannually. The company's tax rate is 40 percent. What is the firm's weighted average aftertax cost of debt
Business
1 answer:
katrin [286]3 years ago
6 0

Answer:

2.9652%

Explanation:

to determine the cost of debt we must use the FMV of the bonds plus the YTM:

first bond:

FMV = 1.09 x $1,000 = $1,090 x 3,600 bonds = $3,924,000

YTM = {C + [(F - P)/n]} / [(F + P)/2] = {17.5 + [(1000 - 1090)/16]} / [(1000 + 1090)/2] = (17.5 - 5.625) / 1045 = 1.136% x 2 = 2.27% annual

second bond:

FMV = 0.95 x $2,000 = $1,900 x 3,950 bonds = $7,505,000

YTM = {C + [(F - P)/n]} / [(F + P)/2] = {59.4 + [(2000 - 1900)/42]} / [(2000 + 1900)/2] = (59.4 + 2.38) / 1950 = 3.168% x 2 = 6.34% annual

total debt = $3,924,000 + $7,505,000 = $11,429,000

weighted average after tax cost of debt:

{($3,924,000/$11,429,000 x 2.27%) + ($7,505,000/$11,429,000 x 6.34%)} x (1 - 0.40) = (0.779% + 4.163%) x 0.6 = 4.942% x 0.6 = 2.9652%

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zmey [24]

The journal entry to issue​ $600 of direct materials and​ $30 of indirect materials to production involves​ debit(s) to the​ B. ​work-in-process inventory account for​ $600 and manufacturing overhead account for​ $30.


Work-in-process inventory refers to a company's goods that are waiting to be finished and completed. While these goods wait to be finished, they are waiting their overall value they are given as well. Manufacturing overhead refers to the items that are used for manufacturing. Everyting that has to take place and be paid for manufacturing to take place.

7 0
3 years ago
Given the following cost and activity observations for Smithson Company's utilities, use the high-low method to calculate Smiths
OleMash [197]

Answer:

The correct answr is C.

Explanation:

Giving the following information:

Cost Machine Hours

January $52,200 20,000

February 75,000 29,000

March 57,000 22,000

April 64,000 24,500

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ highest activity units - Lowest activity units)

Variable cost per unit= (75,000 - 52,200) / (29,000 - 20,000)= 2.53

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 75,000 - (2.53*29,000)= 1600

Fixed costs= LAC - (Variable cost per unit* LAU)

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4 0
3 years ago
Problems with (or leakages from) the money creation process would include an increase in the reserve requirement. unwillingness
mart [117]

Answer:

The correct answer is unwillingness of borrowers to obtain loans from banks to invest in factories or expansion of the firm.

Explanation:

Solution

<em>Given that:</em>

Leakage problem occurs or happens within an economy when the money goes out of the economy, which leads to a loss in the economic value of goods and services, and also leads to loss in profits making.

This would lead to an unwillingness of borrower's to obtain loans from banks in the expansion of the firm or to invest in factories.

4 0
2 years ago
Northern Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,
dedylja [7]

Answer:

Borrowed amount of $2,500

Explanation:

The computation is shown below;

The Total available balance is

= Beginning balance + Receipts - Disbursements

= $12,000 + $30,000 - $34,500

= $7,500

As the cash should be maintained of $10,000

So,  

The amount to be borrowed is

= $10,000 - $7500

= $2,500

3 0
2 years ago
Assume that GDP per capita for two countries is displayed in plot with a ratio scale on the y-axis and a linear time scale (in y
jenyasd209 [6]

Answer:

The correct answer that fills the gaps are: constant ; increasing.

Explanation:

GDP per capita, income per capita or income per capita is an economic indicator that measures the relationship between the level of income of a country and its population. For this, the Gross Domestic Product (GDP) of said territory is divided by the number of inhabitants.

The use of per capita income as an indicator of wealth or economic stability of a territory makes sense because through its calculation national income is interrelated (through GDP in a specific period) and the inhabitants of this place.

The objective of GDP per capita is to obtain data that somehow shows the level of wealth or well-being of that territory at a given time. It is often used as a measure of comparison between different countries, to show differences in economic conditions.

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