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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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A currency trader observes the following quotes in the spot market: 1 U.S. dollar = 122 Japanese yen 1 British pound = 2.25 Swis
andrezito [222]

Answer:

88.38

Explanation:

Given;

1 U.S. dollar = 122 Japanese yen

1 British pound = 2.25 Swiss francs

1 British pound = 1.63 U.S. dollars

Therefore,

2.25 Swiss francs = 1.63 U.S. dollars

1 US. dollar = 2.25/1.63 Swiss francs

1 US dollar = 1.38 Swiss francs

since

1 U.S. dollar = 122 Japanese yen then,

1.38 Swiss francs = 122 Japanese yen

1 Swiss francs = 122/1.38 Japanese yen

1 Swiss francs  = 88.38 Japanese yen

1 Swiss franc can be used to purchase 88.38 Japanese yen.

8 0
3 years ago
Freeman​ Motors, a motorcycle​ manufacturer, had the following contingencies. Determine the appropriate accounting treatment for
mrs_skeptik [129]

Answer:

a. Freeman estimates that it is reasonably possible but not likely that it will lose a current lawsuit.​ Freeman's attorneys estimate the potential loss will be​ $4,500,000.

  • Describe the situation in a note to the financial statements.

Since the event is possible but not likely, it should be disclosed in the footnotes of the financial statements.

b. Freeman received notice that it was being sued. Freeman considers this lawsuit to be frivolous.

  • Do not disclose.

Since this is a frivolous lawsuit, there is no need to disclose it.

c. Freeman is currently the defendant in a lawsuit. Freeman believes it is likely that it will lose the lawsuit and estimates the damages to be paid will be​ $75,000.

  • Record an expense and a liability based on estimated amounts.

Since the negative outcome is probable and you were able to quantify your losses, you must record the expense for $75,000 and include the amount as a current liability.

6 0
3 years ago
A certain project has a project cost of $387,000 and the annual inflows resulting from the product created is $64,000. What is t
Komok [63]

Answer:

Payback period is 6.5625 years

Explanation:

All amounts are in $

Item                outflow              inflow       balance

Year 0            387,000               0            (387,000)

Year 1                  0                  64,000      (323,000)  

Year 2                 0                  64,000      (259,000)  

Year 3                 0                  64,000      (195,000)  

Year 4                 0                  64,000      (131,000)  

Year 5                 0                  64,000      (67,000)  

Year 6                 0                  64,000      (3,000)

The remaining $3000 will flow in

= (3000/64000) × 12

= 0.5625

Payback period is 6.5625 years

4 0
3 years ago
How should an organization design its structure and culture to obtain a core competence in manufacturing and in research and dev
nekit [7.7K]

Answer and Explanation:

core competency of an organization comprise it's multiple resource, capabilities and skills that gives it a competitive advantage in the market. It was originated in management theory by C. K. Prahalad and Gary Hamel.

For an organization to have core competencies in manufacturing and also research and development putting it's organizational structure and culture to use, it has to:

create a flexible and somewhat independent structure for it's research and development department such that innovation is easy. Control must be decentralized and the team must come first

For the manufacturing department, an organic and participative approach should be encouraged. This would allow inclusive management such that workers are included in decision making processes. Managers should also be given more independence while workers should increasingly be empowered

the organization should also take stringent measures in employing the right people for the research and development as well as the manufacturing department such that these individuals are qualified and possess the needed expertise for their areas. Staff should equally be empowered through constant education and new skill acquisitions and be allowed to impart this knowledge on other staff by encouraging transfers in global expansion.

6 0
3 years ago
In order to make sure that audiences can correctly identify your mood and attitude during speech, it is necessary to make sure y
BabaBlast [244]
The correct answer for the question that is being presented above is this one: "c. Intonation." <span>In order to make sure that audiences can correctly identify your mood and attitude during speech, it is necessary to make sure you have correct intonation.</span>
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3 years ago
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