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ANEK [815]
3 years ago
12

Keys Printing plans to issue a $1,000 par value, 20-year noncallable bond with a 7.00% annual coupon, paid semiannually. The com

pany's marginal tax rate is 40.00%, but Congress is considering a change in the corporate tax rate to 45.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted? a. –0.30% b. –0.35% c. –0.36% d. –0.44%
Business
1 answer:
sveticcg [70]3 years ago
3 0

Answer:

option b) -0.35%

Explanation:

For tax rate = 40%

After after-tax cost of debt = cost of debt × ( 1 - Rate )

= 7% × ( 1 - 0.40 )

= 4.20%

For tax rate = 45%

After after-tax cost of debt = cost of debt × ( 1 - Rate )

= 7% × ( 1 - 0.45 )

= 3.85%

Therefore, the change in cost of debt = 3.85% - 4.20% = -0.35%

Hence,

Correct answer is option b) -0.35%

You might be interested in
Interest rate​ (with changing​ years). Keiko is looking at the following investment choices and wants to know what annual rate o
Ivenika [448]

Answer:

a. 5.18%;

b. 10.12%;

c. 6.32%;

d. 9.22%.

Explanation:

We apply the formula of Annual rate of return to calculate for the four cases.

The formula for calculating annual rate of return as below:

Annual rate of return = \sqrt[year]{Ending value/Beginning value} -1 ;

So, for each of the case given, by applying the formula, the detailed calculations for each case will be:

+ For case a :

\sqrt[12]{769.5/420} -1 = 5.18%;

+ For case b:

\sqrt[14]{11,567.45/3,000} -1 = 10.12%;

+ For case c:

\sqrt[20]{110,000/32,303.47} -1 = 6.32%;

+ For case d:

\sqrt[40]{1,100,000/32,275.63} -1 = 9.22%.

4 0
3 years ago
Reginald owns a grocery and his clerks are on strike. Reginald is trying to operate the store with the help of his manager, but
Nata [24]

Answer:

merge law and equity

Explanation:

In resolving labour related or welfare issues the best way to do so will be to hear the grievances of the striking workers and try to find an equitable solution to the situation.

However if all reasonable avenues have been pursued and they still don't want to comply, then legal measures can be taken to make them work.

In this scenario Reginald should call the striking workers and try to come to an equitable solution for the business and workers where there will be a win-win.

If this does not work he can use the law to compel them to comply.

7 0
3 years ago
Epicure Market prepares fresh gourmet entrees each day. On Wednesday, 80 baked chicken dinners were made at a cost of $3.50 each
jenyasd209 [6]

Answer:

The price of a Dinner= $6.22

Explanation:

<em>Mark-up is the proportion of the product cost which is expected to be made as profit. In other words, it is profit expressed as a percentage of product cost.</em>

To account for the spoilage rate of 10%, $3.50 unit cost would be consider as 90% of the cost. Thus, 100% of the cost would be given as follows:

Dinner cost = 100/(100-10)× 3.50= 3.89

The price of a Dinner = product cost + 60% of product cost

The price of a Dinner = 3.89 + 60%*3.89= $6.22

The price of a Dinner= $6.22

6 0
3 years ago
A payday loan company charges 6.00 percent interest for a two-week period. What is the annual interest rate? (Do not round inter
Mashcka [7]

Answer:

The annual interest rate is 156  percent

Explanation:

If   6.00 percent interest for a two-week period then annual interest rate =

rate for a two-week period * (52 weeks/ 2 weeks)  = 0,06 * 26 = 1,56

1,56 * 100 =  156  percent for a year period

<u>Note</u>: One year have 52 weeks

8 0
3 years ago
What is a downside of receiving a tax<br> refund?
Dmitry [639]

Answer:

It's a free loan to the government.

Explanation:

you're essentially giving the government a free loan with no interest.

4 0
2 years ago
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