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padilas [110]
3 years ago
13

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?
Business
1 answer:
Tresset [83]3 years ago
7 0

Answer:

The WACC change if the new tax rate was adopted is - 0.35%

Explanation:

For computing the WACC change, first we have to determine the after tax cost of debt by applying the 40% and 45% tax rate which is shown below:

After tax Cost of debt = Cost of debt × ( 1- tax rate)

For 40% tax rate, it would be

= 7% × ( 1 - 40%)

= 4.2%

For 45% tax rate, it would be

= 7% × ( 1 - 45%)

= 3.85%

The change in WACC would be

= 3.85% - 4.2%

= - 0.35%

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3 years ago
Read 2 more answers
Suppose that the money supply and the nominal GDP for a hypothetical economy are $96 bilion and $336 bilion, respectively. (In p
Alina [70]

Answer:

V = 3.5  (1 dollar circulates 3.5 times in a year)

In short term – Reduction of aggregate demand and real output

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Equation of monetisation =  

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3 years ago
Juliana purchased land three years ago for $50,000. She gave the land to Tom, her brother, in the current year, when the fair ma
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Answer:

Please see attachment

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A city council has requested a household survey be conducted in a suburban area of their city. the area is broken into many dist
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Contrasted with simple random sampling and stratified sampling, cluster sampling has points of interest and disservices. For instance, given equivalent example sizes, group testing normally gives less accuracy than either simple random sampling or stratified sampling. Then again, if travel costs between clusters are high, cluster sampling  might be more practical than alternate strategies.

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The return on investment from education is typically the highest
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