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
hich of these is the definition of client business risk? a. Risks affecting the business operations and potential outcomes of an
Leno4ka [110]

Answer:

Option A Risks affecting the business operations and potential outcomes of an organization's activities.

Explanation:

The reason is that the business risk are those risks that has potential to increase the cost of the company or decrease the revenue of the organization. So here the misstatement will not increase the cost of the organization and the only risk that increase the cost or decrease the revenues is the poor performance of the organization's activities and operations. So the right option which doesn't talks about misstatements is option A.

6 0
3 years ago
To qualify for the quantity discount, which of the following may not be joined together under the definition of any person?
Sedaia [141]

Answer:

C. Father and his 35-year-old son investing in separate account.

Explanation:

Quantity discount when offered relates to one particular account, and not multiple accounts at a time.

In a transaction joint accounts are called as single person where there is only one main account in consideration and no secondary account exists for the same.

As in the given options,

Option A of husband and wife investing in a joint account means a single account is made of which both the husband and wife are controllers.

Option B is of UTMA account which is made for the benefit of the minor child, although involves two people that is parent and child, but is run individually by the parent and is a single account.

Further Option C provides for separate investment accounts , which means two different accounts and therefore are completely different one of father and another of son, thus do not qualify of quantity discount jointly, either of the one account can claim the quantity discount as a person.

4 0
3 years ago
Molly, a successful real estate salesperson, took some time off to stay at home with her first child. Days turned into weeks, we
Mariana [72]

Answer:

No

Explanation:

A licensing agreement is a partnership between an intellectual property rights owner (licensor) and another who is authorized to use such rights (licensee) in exchange for an agreed payment (fee or royalty).

Molly cannot simply pick up where she left off because two years after the license expires, all license rights lapse. Molly must re-qualify through the examination process before being licensed in real estate once again.

7 0
3 years ago
The following U.S. Treasury bond is listed in the The Wall Street Journal: Rate Mo/Yr Bid Asked 9.50 Oct 38 135:30 136:04 This $
STatiana [176]

Answer:

6.35%

Explanation:

If you purchase this bond you will need to pay $1,000 x 136.04% = $1,360.40

the coupon rate is 9.5% / 2 = 4.75% or $47.50 every six months

the bond matures in 18 years or 36 semiannual periods

yield to maturity = {coupon + [(face value - market value)/n]} / [(face value + market value)/2]

YTM = {47.5 + [(1,000 - 1,360.4)/36]} / [(1,000 + 1,360.4)/2]

YTM = 37.49 / 1,180.2 = 0.031766 x 2 (annual yield) = 0.06353 = 6.35%

8 0
3 years ago
An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minim
tatyana61 [14]

Answer: c. 3%

Explanation:

The Insurance company guaranteed that the minimum rate that they will pay their policyholders as 3%. Just because the investments are now drawing only 2.5% due to the economic downtown does not absolve them of this agreement.

They must therefore still pay their policy holders the minimum return guaranteed which is 3%.

3 0
3 years ago
Other questions:
  • No matter how well the football team plays, they will win few games because they are in a league that consists mainly of stronge
    14·1 answer
  • At the profit maximizing level of employment, the wage rate is _____ and the level of employment is _____: w3; q1 w2; q2 w1; q1
    8·1 answer
  • Which of these banking services allows your paycheck to be transmitted electronically to your bank?
    12·1 answer
  • Assume there is no leakage from the banking system and that all commercial banks are loaned up. Suppose the reserve ratio is 25%
    6·1 answer
  • CEO compensation is often in the news. In response to this, some CEOs at large companies have agreed to set their base pay at $1
    14·1 answer
  • Chandler Sporting Goods produces baseball and football equipment and lines of clothing. This year the company had cash and marke
    9·1 answer
  • In the context of Camp Bow Wow, which of the following is likely to be affected and shaped by founder Heidi Ganahl's inspiration
    13·1 answer
  • An income statement for Sam's Bookstore for the first quarter of the year is presented below: Sam's Bookstore Income Statement F
    15·1 answer
  • What is the expected return on a portfolio that has $100 invested in stock 1 with an expected return of 18.0% and $45 invested i
    5·1 answer
  • Even after commencement of business operations, officers and directors have a responsibility to comply with _______.
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!