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Alexeev081 [22]
3 years ago
14

At the present time, Perpetualcold Refrigeration Company (PRC) has 10-year noncallable bonds with a face value of $1,000 that ar

e outstanding. These bonds have a current market price of $1,278.41 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. If PRC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 3.10% 3.87% 3.48% 4.64%
Business
1 answer:
Assoli18 [71]3 years ago
6 0

Answer:

The correct answer is 4.33%(approx)

Explanation:

According to the scenario, the given data are as follows:\

Face value = $1,000

Market price = $1,278.41

Coupon Rate = 11%

So Coupon Payment = $110

Years to maturity = 10 years

So, we can calculate the after tax cost of debt by using following method:

After Tax Cost of Debt = YTM × ( 1 - Rate of Tax)

Where, YTM = \frac{C + \frac{F - P}{T} }{\frac{F + P}{2} }

So, by putting the following value, we get

YTM = 0.0721

So by putting the value in formula, we get

After Tax Cost of Debt = 0.0721 × ( 1 - 0.4)

= 4.33% (approx)

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Williams Alternative Power, Inc., a company developing solar panels, has done considerable research and limited production durin
Juli2301 [7.4K]

Answer:

greatly increased.

Explanation:

IPO refers to Initial Public Offering which is what new companies begin to do by offering initial shares of the company in order to raise money. This being said we can say that at this stage of its life cycle, its ability to attract venture capital is greatly increased. This is because Venture Capital are private equity from a large number of firms looking to invest in new companies with very high growth potential for the future.

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5 0
3 years ago
Read 2 more answers
Budgeted financial statements are financial statements based on budgeted amounts rather than actual amounts.
Tasya [4]

Answer:

The statement is True.

Explanation:

Budgeted financial statements are prepared for a future period of time. So that it is easy to anticipate certain fixed and variable costs and allocate financial resources to them.

Also, Budgeted financial statement are useful during the strategic planning process and planning on future business expansions.

3 0
3 years ago
Cash flows directly related to production and sale of the firm's products and services are called?
Leona [35]

A  cash flows directly related to production and sale of the firm's products and services are  called Operating cash flow .

<h3>What is operating cash flows and 3 types of cash flows? </h3>

Cash flow from operating activities indicates the amount of money a company brings in from its ongoing,regular business activities such as manufacturing and selling goods or providing a service to customers. Types of cash flows are cash flow from operating activities, cash flow from investing and cash flow from financing activities.

A firms operating cash flows is the cash flow it generates from  its normal operation producing  and selling its output of goods or services.

to learn more about OCF click here brainly.com/question/17001006

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6 0
1 year ago
Riley is a 50% partner in the RF Partnership and has an outside basis of $56,000 at the end of the year prior to any distributio
Savatey [412]

Answer:

The land basis will be $8,000 and partnership basis will be $42,000.

Explanation:

The outside basis at the end of the year is $56,000.

The cash basis is $6,000.

The fair value of land is $14,000.

The land basis to RF is $8000.

The partnership basis will be

=Outside basis-cash basis-land basis

=$(56,000-6,000-8,000)

=$42,000.

So, the land basis will be $8,000 and partnership basis will be $42,000.

5 0
3 years ago
A proposed project has an initial cost of $38,000 and cash inflows of $12,300, $24,200, and $16,100 for years 1 through 3, respe
In-s [12.5K]

Answer:

IRR is greater than required return by 17.38 - 16.8 % = 0.58 %

so project will accept

Explanation:

given data

initial cost = $38,000

cash inflows year 1 =  $12,300

cash inflows year 2= $24,200

cash inflows year 3 = $16,100

rate of return = 16.8 %

solution

we consider here IRR is = x so

present value of inflows is equal to present value of outflows   .............1

we can say that it as

initial cost = present value

3800 = \frac{12300}{1*x} +\frac{24200}{(1*x)^2} +\frac{16100}{(1*x)^3}

solve it we get

x = 17.38%

here IRR is greater than required return by 17.38 - 16.8 % = 0.58 %

so project will accept

4 0
3 years ago
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