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3 years ago

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Bourdon Software has 11.2 percent coupon bonds on the market with 20 years to maturity. The bonds make semiannual payments and c

urrently sell for 108.4 percent of par.
What is the current yield on the bonds?

What is the YTM?

What is the effective annual yield?

1 answer:

sasho [114]3 years ago

5 0

Answer:

119.6

Explanation:

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Assuming that Borland retires shares it reacquires, record the appropriate journal entry for each of the following transactions:

KiRa [710]

Answer:

The first transaction is that 10 million shares are being reacquired at 32.50 per share so we need to find out how much cash is spent to buy these shares.

32.5*10 million = $325 million

We will debit treasury stock and credit cash because the company is buying shares from the market and paying cash

The second transaction is reacquiring 10 million shares at 36 per share so we need to find how much cash is spent

10 million *36= $360 million

We will debit treasury stock and credit cash because the company is buying shares from the market and paying cash

In the third transaction 1 million shares are being sold for 42, so need to figure out how much cash the company gets from the transaction

42* 1 million = 42 million

We will debit cash and credit common stock as the company is issuing shares to the market and getting cash for it

In the fourth transaction 1 million shares are being sold for 36, so need to figure out how much cash the company gets from the transaction

36* 1 million = 36 million

We will debit cash and credit common stock as the company is issuing shares to the market and getting cash for it

Journal entries

Debit Credit

Treasury stock 325 million

Cash 325 million

Treasury stock 360 million

Cash 360 million

Cash 42 million

Common stock 42 million

Cash 36 million

Common stock 36 million

Explanation:

5 0

3 years ago

Certain economic principles are of considerable importance in the valuation of real estate. The principle that "no buyer will pa

Svet_ta [14]

Answer:

Substitution

Explanation:

Principle of subsitution states that no consumer should buy a product for a high price of he can get an alternative (duplicate) that is of a cheaper price.

Substitutes are alternatives that provide similar satisfaction to the customer.

When the price of one product goes up the customer has a choice of going for an alternative.

For example honey and sugar are substitutes. When the price of one goes down people will go for the cheaper alternative. This acts as a price control mechanism.

5 0

2 years ago

A popular clothing brand has released a new range of pants. The brand manager wants to target several sections of youth with thi

Andrej [43]

.Answer:

A. customer classification

Explanation:

Classification of consumers is the process of grouping customers according to shared traits. Customers in the same group will share some common characteristics that a business can use to serve them better. In customer classification, the firm seeks to identify the common traits that make customers have similar buying patterns.

The manager in the clothing brand has identified traits he can use to classify the target customers into four groups. He has applied customer classification. If he subdivides each group by specific attributes such as age, gender, or other similarities, he would be doing customer segmentation

7 0

3 years ago

If Wild Widgets, Inc., were an all-equity company, it would have a beta of 0.9. The company has a target debt-equity ratio of .4

Veronika [31]

Answer:

a. 6.5%

b. 13.06%

c. 10.91%

Explanation:

a.

Cost of debt of a bond is yield to maturity. Yield to maturity is the rate of return that a investor actually receives or a borrows actually pays on a bond. It is long term return or payment which is expressed in annual term.

Formula for yield to maturity is as follow

Yield to maturity = [ C + ( F - P ) / n ] / [ (F + P ) / 2 ]

By placing values in the formula

Assuming the bond face value is $1,000

Yield to maturity = [ (1000x7.2) + ( 1,000 - $1,090 ) / 20 ] / [ ( 1,000 + $1,090 ) / 2 ]

Yield to maturity = [ $72 + ( 1,000 - $1,090 ) / 20 ] / $1,045

Yield to maturity = [ $72 - $4.5 ] / $1,045

Yield to maturity = $67.5 / $1,045

Yield to maturity = 6.5%

So, the cost of Debt is 6.5%

b.

As 0.9 is the unlevered beta, We need Levered beta due to restructuring of capital.

Beta Levered = Beta Unlevered x ( 1 + ( 1 - tax rate ) x Debt / Equity)

Beta Levered = 0.9 x ( 1 + ( 1 - 0.35 ) x 0.4 )

Beta Levered = 1.134

Cost of equity can be calculated using CAPM

CAPM calculated the expected return on an equity investment based on the risk free rate, market premium and risk beta of the investment.

Formula for CAPM is as follow

Expected return = Risk free Rate + Beta ( Market premium)

As we know the Risk premium is the difference of market return and risk free rate.

Expected return = Risk free Rate + Beta ( Market Return - Risk free Rate )

Ra = Rf + β ( Rm - Rf )

Ra = 4.1% + 1.134 ( 12% - 4.1% )

Ra = 13.06%

Cost of Equity is 13.06%

c.

WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs.

According to WACC formula

WACC = ( Cost of equity x Weightage of equity )+ ( Cost of debt ( 1- t) x Weightage of debt )

Placing the values in formula

If the debt to equity 0.4 the equity value should be 1 and total capital is 1.4 ( 1 + 0.4 )

WACC = ( 13.06% x 1 / 1.4 )+ ( 6.5% ( 1- 0.35) x 0.4 / 1.4 ) = 9.71% + 1.2% = 10.91%

WACC is 10.91%

4 0

2 years ago

Consider a project with the accompanying Gantt chart. Stella is your only electrical engineer and she is responsible for activit

Yuri [45]

The information about the question is incomplete, hence the general answer. It is to be noted that the question is about Gantt Charts.

<h3>What is a Gantt Chart?</h3>

A Gantt Chart is a two-dimensional representation of a project showing the volume of work to be done, how the work is broken down into various parts, how long each part will take, those responsible for each part of the project, and even where each project overlaps.

Gantt chart (sample attached) is very crucial for Project Management. The goal of using a Gantt chart is to ensure that the project is completed on or before the scheduled time in order to prevent losses.

Please note that a Gantt Chart can be created and edited using MS Exel Worksheet.

Learn more about Gantt Chart at:

brainly.com/question/5515485

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2 years ago