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ch4aika [34]
4 years ago
5

Kenny Electric Company's noncallable bonds were issued several years ago and now have 20 years to maturity. These bonds have a 9

.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. If the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation? Select one: a. 4.35% b. 4.58% c. 4.83% d. 5.08% e. 5.33%
Business
1 answer:
solmaris [256]4 years ago
7 0

Answer:

after tax cost of debt = 5.08

so correct option is d. 5.08%

Explanation:

given data

maturity = 20 years

annual coupon = 9.25%

sells price = $1,075

par value = $1,000

tax rate = 40%

to find out

component cost of debt

solution

we get here yield to maturity  YTM that is express as

periodic interest payment PMT × (\frac{1-(1+YTM/2)}{YTM/2})^{-40} + (\frac{par\ value}{1+YTM/2})^{40}  = sells price   .................1

periodic interest payment PMT = par value × coupon rate ÷ 2

periodic interest payment PMT = $46.25

so from equation 1 we get

46.25 × (\frac{1-(1+YTM/2)}{YTM/2})^{-40} + (\frac{par\ value}{1+YTM/2})^{40}  = 1075

YTM = 8.46 %

and

after tax cost of debt will be here as

after tax cost of debt = YTM ( 1- tax rate )

after tax cost of debt = 8.46% ( 1- 40% )

after tax cost of debt = 5.08

so correct option is d. 5.08%

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aalyn [17]

Answer:

Being productive means to be able to get more things done in a period of time and six suggestions to ensure that your telephone calls on the job are productive are:

-Plan an agenda to handle the call to know what you need to discuss.

-Have a clear goal to accomplish with the call to avoid discussing things that are not relevant to this.

-Avoid small talk that can take a lot of time and doesn't allow to get to the point.

-Limit the duration of the call to get people to focus on the important things.

-Summarize the points of the call to make sure that everyone is on the same page.

-End the call when the goal that was set has been accomplished.

8 0
3 years ago
Despite trade restrictions, international business is a. struggling for survival. b. decreasing. c. slowing down. d. moving slow
vlabodo [156]

Answer:

The answer is e. growing

Explanation:

The reason international business will continue to grow is because no nation can meet all its needs by itself. There will always be importation and exportation. This is where Comparative Advantage comes in.

What is comparative advantage?

  • Simply put, this is the ability of a company or an economy to produce and sell goods and services at a lower price than its competitors, and still realize a larger sales margin. This theory was introduced by the English political economist David Ricardo in 1817.

Another reason why international trade will continue to grow is because of Absolute Advantage.

  • Absolute advantage refers to the ability of an economy or a company to produce more or better goods and services than its others.

Let us assume that country A cannot produce its own oil, but country B can. In this scenario, country B has Absolute advantage over country A, therefore country A will naturally import oil from country B regardless of whether there are trade restrictions between them. This is because country A must fulfill its oil needs whether it likes it or not.

3 0
3 years ago
If the company paid $20,100 of its advertising expense during the current year, what amount is owed for advertising at the end o
larisa [96]

Answer:

Advertising expense 6,600. Rent expense 11,600. What is the amount of total assets to be reported on the balance sheet at the end of the year? $106,800.

Explanation:

6 0
2 years ago
A firm expects to sell 26,000 units of its product at $12.00 per unit and to incur variable costs per unit of $7.00. Total fixed
Sedaia [141]

Explanation:

Given that

Number of sales units = $26,000

Sale price = $12 per unit

Variable cost per unit = $7

Fixed cost = $80,000

So, the contribution margin per unit is

= Selling price per unit - variable cost per unit

= $12 - $7

= $5

And, the contribution margin in dollars is

= Number of sales unit × sale price - number of sales unit × sale price

= 26,000 units × $12 - $26,000 × $7

= $312,000 - $182,000

= $130,000

3 0
3 years ago
A salesperson earns a weekly salary of $600 plus a commission of 1 percent of sales over $2,000. If he earned $650 in a certain
scoundrel [369]

Answer:

$ 7000

Explanation:

Given data;

Weekly salary of the salesperson = $ 600

Commission earned = 1 % on the sales over $ 2000

The amount earned by the salesman in the week = $ 650

Thus, the commission received = $ 650 - $ 600 = $ 50

Now,

let the amount over $ 2000 for which the commission of $ 50 paid be 'x'

therefore,

1 % of x = $ 50

or

0.01x = $ 50

or

x = $ 5000

Hence, the total sales was of $ 2000 + $ 5000 = $ 7000

3 0
4 years ago
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