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algol [13]
3 years ago
9

Suppose we have a bond issue currently outstanding that has 25 years left to maturity. The coupon rate is 9% and coupons are pai

d semiannually. The bond is currently selling for $908.72 per $1000 bond. If the firm's marginal tax rate is 30%. What's the firm's after-tax cost of debt?________
A) 3.5%

B) 5.0%

C) 6.3%

D) 7.0%
Business
1 answer:
kotykmax [81]3 years ago
6 0

Answer:

The after tax cost of debt is

D) 7.0%

Explanation:

In order to find the firms after tax cost of debt we have to find it's pre tax cost of debt, which is also the yield to maturity or interest rate of the bond. In order to find it we need 4 other variables, the par value or future value of the bond, the present value of the bond, the coupon payments and the number of maturity periods.  

The present value is 908.72, the future value is 1,000, the coupon payment is (0.09*1000*0.5)= 45. We multiply the 9% coupon rate with the future value of the bond and divide it by 2 as 9 is the coupon rate and because there are semi annual payments we will divide it by 2. The number of periods are (25*2) as there are 25 years to maturity and 2 payment periods each year so number of periods are 50.

We need to put all these values in a financial calculator

Pv= 908.72

FV=-1000

PMT= -45

N= 50

Compute I=5.00

This is the semi annual interest rate so we will multiply it by 2 to find the yearly interest rate so 5*2= 10.

10% is the pre tax cost of debt and now we will multiply it by (1-tax rate) to find the after tax cost of debt

0.1*0.7= 0.07= 7%

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________ refers to all of the methods, policies, and organizational procedures that ensure the safety of the organization's asse
lilavasa [31]

Answer:

The correct answer is d) Controls

The goal of Control in an organization is making sure that the company's procedures meet the required criteria of a particular standard. A company needs to have accounting standards, production standards, and management standards, and it is through control processes that those standards are met.

7 0
3 years ago
Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. The total value of yo
diamong [38]

Answer:

hope this helps

Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at $10 a share and adding it to your portfolio. Alpha has an expected return of 21.5% and a beta of 1.70. The total value of your current portfolio is $90,000. What will the expected return and beta on the portfolio be after the purchase of the Alpha stock? Do not round your intermediate calculations.

Old portfolio return

11.0%

Old portfolio beta

1.20

New stock return

21.5%

New stock beta

1.70

% of portfolio in new stock = $ in New / ($ in old + $ in new) = $10,000/$100,000=

10%

New expected portfolio return = rp = 0.1 × 21.5% + 0.9 × 11% =

12.05%​

New expected portfolio beta = bp = 0.1 × 1.70 + 0.9 × 1.20 =

1.25​

Explanation:

7 0
2 years ago
Which manmade fiber is easy care
ankoles [38]

it is Polyester/cotton

7 0
3 years ago
Highway 151 Inc. can further process 2,500 pounds of Product C to produce Product M. Product C is currently selling for $36 per
Grace [21]

Answer:

$27,500

Explanation:

Revenue from the sale of  Product C = $36 × 2500

                                                             = $90,000

Cost to produce Product C = $14 × 2500

                                             = $35,000

Revenue from the sale of Product M = $47 × 2500

                                                              = $117,500

Differential Total Net Revenue of producing Product M

= $117,500 - $90,000

= $27,500

4 0
3 years ago
Read 2 more answers
Nimbus Inc. is a hybrid organization. The organizational structure of the company has been developed to combine geographic suppo
kolbaska11 [484]

Answer:

<em> B) that Nimbus has a matrix structure</em>

Explanation:

Yes absolutely the above information is true, and from the following statement that can be fittingly inferred is given in OPTION(B).

<em>Because matrix structure is something in that organizational structure of the company has a single record that is given to multiple administrator.</em>

So, therefore as we can see in the scenario that Nimbus Inc. is also has a matrix structure.

7 0
3 years ago
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