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tino4ka555 [31]
2 years ago
9

Avicorp has a $ 12.9 million debt issue​ outstanding, with a 5.9 % coupon rate. The debt has​ semi-annual coupons, the next coup

on is due in six​ months, and the debt matures in five years. It is currently priced at 93 % of par value. a. What is​ Avicorp's pre-tax cost of​ debt? Note: Compute the effective annual return. b. If Avicorp faces a 40 % tax​ rate, what is its​ after-tax cost of​ debt? ​Note: Assume that the firm will always be able to utilize its full interest tax shield.
Business
1 answer:
zloy xaker [14]2 years ago
8 0

Answer:

a)

Pre-tax Cost Of Debt = 7.64%

b)

Tax Rate = 40%    

Post Tax cost of debt = 7.33% * (1 - 40%) = 4.58%  

So Post Tax cost of Debt = 4.58%

Explanation:

Bond Par Value =  12,900,000  

Bond Market Price 93% of face value = 11,997,000  

Years To maturity = 5.00  

Annual Interest 5.9% = 761,100

Formula = [Annual Interest + (Par Value-Market Value) / Years to Maturity] / [(Par value+Market Price*2)/3]

Year To Maturity = [761100 + (12900000 - 11997000) / 5] / (12900000 + 2*11997000) / 3

Year to maturity = 7.33%

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direct labor per unit = $40,000 / 5,000 units = $8 per unit

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total variable cost per unit = $8 + $1 = $9

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Last year, Myron purchased a $10,000 certificate of deposit with a 3% rate of interest from his bank. The government reported th
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Myron gains, while the bank loses.

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The general ledger of Sandhill Corporation as of December 31, 2021, includes the following accounts: Copyrights $ 58000 Deposits
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$687,000

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<u>Calculation of Total Intangible Assets will be :</u>

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