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Andreas93 [3]
3 years ago
5

Hi Tech Products has 35,000 bonds outstanding that are currently quoted at 102.3. The bonds mature in 11 years and carry a 9 per

cent annual coupon. What is the firm's aftertax cost of debt if the applicable tax rate is 35 percent?
Business
1 answer:
Xelga [282]3 years ago
6 0

Answer:

aftertax cost of debt =5.63%

Explanation:

fisrt we need to know the formula for the yield to maturity

Yield to maturity (YTM)

YTM= ( I+(F-P)/n ) / ( 0.6P +0.4F)

YTM=  (9 + ( 100-102.3) / 11 ) / (0.6*102.3 + 0.4*100)

YTM= 0.0867

YTM= 8.67%

after taxes we have...

8.67% (1-0.35%)

=0.0563

=5.63%

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Roberto designers was organized on January 1,2021. The firm was authorized to issue 100,00 shares of $5 par value common stock.
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Explanation:

Answers

transactions relating to stockholder's equity

Issued shares 10,000* $7 = $70,000

Issued shares 20,000*$8   = $160,000

net income                            = $100,000

                                                --------------  

Sub Total                                 $330,000  

Debts                              

50,000 dividend                       ($50,000)

3,000 *$10 treasury stock       ($30,000)    

                                                   --------------  

Sub Total                                   ($80,000)

Total   $330,000-$80,000 =  $250,000                                    

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