1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
kakasveta [241]
3 years ago
14

Baxter International Inc. can obtain funds for future investments through retained earnings, new issues of common stock, and iss

uance of debt. Baxter's stock currently sells for $18 per share, paid a dividend of $1.20 last year(D0=$1.20), has a growth rate of 6% that is expected to continue, and new issues carry flotation costs of7%. Baxter's bonds sell for $945, pays a 7% annual coupon, matures in 30 years, and new issues carry3% flotation costs. Baxter's tax rate is 30%.9.What is Baxter's after-tax cost of debt
Business
1 answer:
CaHeK987 [17]3 years ago
7 0

Answer:

The multiple choices are:

a. 7.72%  

b. 5.40%

c. 5.22%

d. 7.46%

e. 4.90%

Option B is the correct answer,5.40%

Explanation:

In order to determine the after tax cost of Baxter's debt,we need to first of all calculate the pretax cost of debt which is by applying the rate formula in excel.

=rate(nper,pmt,-pv,fv)

nper is the number of coupon payments the bond would make which is 30

pmt is the annual coupon interest on the bond=7%*$1000=$70

pv is the current price of the bond minus the flotation cost=$945*(1-3%)=$916.65

The fv is the face value of $1000 per bond

=rate(30,70,-916.65,1000)

pretax cost of debt=rate=7.72%

After tax cost of debt=pretax cost of debt*(1-t)

t is th tax rate of 30% 0or 0.30

after tax cost of debt=7.72%*(1-.3)=5.40%

You might be interested in
An increase in investment shifts the ae curve upward by an amount equal to the​ ______, and shifts the ad curve rightward by an
kogti [31]
<span>An increase in investment shifts the AE curve upward by an amount equal to the​ change in investment, and shifts the AD curve rightward by an amount equal to the​ change in the investment by the multiplier.
The AE curve stands for the aggregate expenditure which measures expenditures on consumption. The AD curve stands for the aggregate demand curve which measures the demand levels when prices change for a good or service in an economy. 

</span>
5 0
3 years ago
Miller Fruit wants to expand its citrus grove operations. The firm estimates that it needs $8.6 million to buy land and establis
sergeinik [125]

Answer:

2.072 rights

Explanation:

Amount needed to buy the land = $8.6 million = $8,600,000

stock outstanding = 540,000

Market price per share = $34.80

subscription price = $33 a share

Now,

Number shares to be issued = ( Amount needed ) ÷ ( subscription price )

= $8,600,000 ÷ $33

= 260606.06 shares

1 rights will be issued per stock

thus,

number of rights required for purchase

= ( stock outstanding ) ÷ ( Number shares to be issued  )

= 540,000 ÷ 260606.06

= 2.072 rights

3 0
3 years ago
Suppose you are a manager at an advertising agency who is eager to utilize Covey's advice about delegation. Today, you need to w
yan [13]

<u>Answer:</u>

<em>Customer administrations</em><em> supervisors interface an organization's imaginative endeavours with publicists' needs, from driving the main gathering on another record to looking into </em><em>news sources for a crusade</em><em>. </em>

<u>Explanation:</u>

They keep up associations with administrators of customer organizations, supervise the office's record group over all orders and create procedures for customers.

So, the customer administrations supervisor is responsible for all parts of the conveyance of work to the customer. Be that as it may, the record head's job goes past only giving a customer what he needs.

8 0
3 years ago
Josh separated people who wanted a high quality lawn mower from people who wanted a low priced lawn mower, then saw if different
Vsevolod [243]

Answer:

The correct answer is letter "D": behavioral.

Explanation:

In market segmentation, classifying customers by behavior implies analyzing their consumption patterns to find out what type of product they are likely to buy under what conditions. This research allows companies to know what each type of client is looking for so the corporation can dedicate a tailored item for each market sector. By doing so, the firm increases its opportunities to generate more sales.

3 0
2 years ago
During its first month of operation, the Quick Tax Corporation, which specializes in tax preparation, completed the following tr
DanielleElmas [232]

Answer:

Trial Income Statement:

Service revenue         $17,000

Rent expense            ($3,500)

Insurance expense      ($350)

<u>Wages expense       ($10,500)</u>

Net income                $2,650

*We need to adjust other expenses like supplies or utilities. I assumed the salaries paid were for a 10 days period since no one pays salaries in advance.

Trial Balance Sheet

Assets:

Cash $62,200

Supplies $1,000

Prepaid insurance $3,850

<u>Equipment $10,000           </u>

Total Assets $77,050

Liabilities and Equity:

Accounts payable $8,000

Wages payable $7,000

Common Stock $60,000

<u>Retained earnings $2,050               </u>

Total Liabilities and Equity $77,050

Explanation:

July 1

Dr Cash 60,000

    Cr Common stock 60,000 (6,000 stocks $10 par value)

July 3

<u>Rent expense 3,500</u>

    Cr Cash 3,500

July 5

Dr Prepaid insurance 4,200

    Cr Cash 4,200

Adjusting entry July 31

Dr Insurance expense 350

    Cr Prepaid insurance 350

July 7

Dr Supplies 1,000

    Cr Accounts payable 1,000

July 10

Dr Wages expense 3,500

    Cr Cash 3,500

Adjusting entry July 31

Dr Wages expense 7,000 ($3,500 x 2 10 day periods)

    Cr Wages payable 7,000

July 14

Dr Equipment 10,000

    Cr Cash 2,500

    Cr Accounts payable 7,500

July 15

Dr Cash 8,000

    Cr Service revenue 8,000

July 19

Dr Accounts payable 500

    Cr Cash 500

July 31

Dr Cash 9,000

    Cr Service revenue 9,000

Dr Retained earnings 600

    Cr Dividends payable 600

Dr Dividends payable 600

    Cr Cash 600

6 0
2 years ago
Other questions:
  • A company, Blue Marbles, who has a presence on Interwebs has become actively involved in political campaigns and uses their prof
    7·1 answer
  • On June 1, Parson Assoc. sold equipment to Arleo and agreed to accept a 3-month, $55,000, 10% interest-bearing note in payment a
    8·1 answer
  • You have just been promoted at work and you are now responsible for all marketing communication through the different Internet c
    10·2 answers
  • If the revenue for a certain product is $9.00 each and the company sells x products, then the revenue equation is R = 9x. If the
    8·1 answer
  • By understanding its business, an organization can take steps to define its __________, a statement of the organization's scope.
    14·2 answers
  • When the Fed acts as a "lender of last resort," like it did in the financial crisis of 2007-2008, it is performing its role of
    12·1 answer
  • Who is most likely to have claimed that "As the client becomes more self-aware, more self-acceptant, less defensive and more ope
    11·1 answer
  • Which pricing strategy is characterized by the setting of a low introductory price to help drive consumer awareness and create a
    9·1 answer
  • A construction firm can achieve a $15,000 cost savings in Year 1, increasing by $3000 each year for the next 5 years, by convert
    6·1 answer
  • How were special economic zones (sezs) supposed to help the chinese economy? by establishing agricultural cooperatives by increa
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!