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Cerrena [4.2K]
3 years ago
10

A firm recently issued $1,000 par value, 20-year bonds with a coupon rate of 9%. Coupon interest payments will be paid semi-annu

ally. The bonds sold at par value, but the firm paid flotation costs amounting to 5% of par value. The firm has a tax rate of 21%. What is the firm's after-tax cost of debt for these bonds?
Business
1 answer:
Valentin [98]3 years ago
3 0

Answer:

cost of debt 0.0748421 = 7.48%

Explanation:

\frac{r(1-t)}{(1-f)} = $after tax cost of debt

The flotation cost makes the cost increase as we did not receive the whole amount but a diminished portion.

Also, the cost is decrease as are tax deductible making the interest expense to provide a tax shield.

pretax cost of debt =

0.09 x (1 -0.21) / (1 - 0.05) = 0,0748421

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2 years ago
Kim is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Kim is living a
IgorLugansk [536]

Answer:

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3 0
2 years ago
The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ende
Paladinen [302]

Answer:

Results are below.

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<u>First, we need to calculate the cost of goods sold:</u>

COGS= beginning finished inventory + cost of goods purchased - ending finished inventory

COGS= 30,000 + 100,000 - 40,000

COGS= 90,000

<u>Now, the number of skis sold:</u>

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<u>Traditional income statement:</u>

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COGS= (90,000)

Gross profit= 60,000

Total selling expense= (50*200 + 20,000)= (30,000)

Total administrative expense= (10*200 + 20,000)= (22,000)

Net operating income= 8,000

<u>Contribution format income statement:</u>

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4 0
3 years ago
Johns Company manufactures products R, S, and T from a joint process. The following information is available: Product R S T Tota
Kryger [21]

Answer:

C) $ 80,000 $ 70,000

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=0.4×$200,000

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S = $200,000-$50,000-$80,000

= $70,000

Therefore the sales value at split-off for products R is $80,000 and S $70,000

6 0
3 years ago
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