Please help me!

Avicorp has a $10 million debt issue outstanding, with a 6% coupon rate. The debt has semiannual coupons, the next coupon is due

rjkz [21]

Answer:

Explanation:

Pretax cost of debt is the annual rate(YTM) of the bond. Using a financial calculator, input the following to calculate it;

N = 5*2 = 10

PV = -(95% *10,000,000) = -9,500,000

Coupon PMT = (6%/2)*10,000,000 = 300,000

FV = 10,000,000

then compute semiannual rate; CPT I/Y = 3.604%

convert to annual rate = 3.604*2 = 7.21%(this is the pretax cost of debt)

After tax cost of debt is calculated because interest payable on debt has tax shield. The formula is as follows;

Aftertax cost of debt = pretax cost of debt (1-tax)

AT cost of debt = 7.21% (1-0.40)

AT cost of debt = 4.33%

8 0

2 years ago

Consider the market for bagels, which is currently at equilibrium, and where Pbagel and Qbagel denote the price and quantity of

UNO [17]

Answer:

please refer to attachment for more explanation

Explanation:

a. a. Since both goods are complementary goods an increase in the price of cream cheese would cause equilibrium price and quantity of bagel to decrease.

b. If the price of the substitute good croissant decreases then the demand for bagel will fall since croissant is obviously cheaper therefore demand curve will shift downward and price and quantity will fall.

c. Lower income of the consumer would make the demand for the inferior good bagel to rise. Demand curve will shift upwards and price and quantity will rise.

7 0

3 years ago

Problem 3.22: Trade Deficits and J-curve Adjustment Path Assume the United States has the following import/export volumes and pr

Sergio039 [100]

Answer:

The pre-devaluation cost is ($880) and the pst-devaluation trade balance is ($1398)

Explanation:

Assumptions Values

Initial spot exchange rate, $/fc $2.00

Price of exports, dollars ($) * 20.0000

Price of imports, foreign currency (fc) * 12.0000

Quantity of exports, units * 100

Quantity of imports, units * 120

Percentage devaluation of the dollar 18.00%

Price elasticity of demand, imports * (0.900)

a. The pre-devaluation trade balance--

Revenues from exports, $ $2,000

Expenditures on imports, fc * 1,440

Expenditures on imports, $ $2,880

Pre-devaluation trade balance ($880)

b. Resulting trade balance immediately after devaluation

Revenues from exports, $ $2,000

Expenditures on imports, fc * 1,440

New spot exchange rate, after devaluation $2.36

Expenditures on imports, $ $3,398

Post-devaluation trade balance (currency contract period) ($1,398)

8 0

3 years ago

Do the following functions exhibit increasing, constant, or decreasing returns to scale? What happens to the marginal product of

Phantasy [73]

Answer:?????????????????????????????

8 0

2 years ago

A 3/1 ARM is made for $150,000 at 7 percent with a 30-year maturity. a. Assuming that fixed payments are to be made monthly for

Neko [114]

Answer:

a. Assuming that fixed payments are to be made monthly for three years and that the loan is fully amortizing, what will be the monthly payments? What will be the loan balance after three years?

monthly payment = $997.95
principal balance after 36th payment = $145,090.59

b. What would new payments be beginning in year 4 if the interest rate fell to 6 percent and the loan continued to be fully amortizing?

monthly payment = $905.34

c. In (a) what would monthly payments be during year 1 if they were interest only? What would payments be beginning in year 4 if interest rates fell to 6 percent and the loan became fully amortizing?

a. $875

b. $935.98

Explanation:

A 3/1 adjustable rate mortgage is a 30 year mortgage where the interest rate is fixed for the first 3 years, and then it can vary.

I prepared an amortization schedule that shows the first 3 payments with a 7% interest rate and then the rest of the payments will carry a 6% interest rate.

The monthly payment for the first 36 months is $997.95 (principal balance after 36th payment $145,090.59), then it decreases to $905.34 per month.

See amortization schedule 1

if the monthly payments only covered interest expenses during the first 3 years, they would be $150,000 x 7%/12 = $875

then the monthly payments would be $935.98.

See amortization schedule 2

Download pdf

6 0

3 years ago