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aalyn [17]
3 years ago
13

5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,000 face value and an 8% coupon, semiannua

l payment ($40 payment every 6 months). The bonds currently sell for $894.87. If the firm's marginal tax rate is 25%, what is the firm's after-tax cost of debt
Business
2 answers:
Reika [66]3 years ago
7 0

Answer:

Firms after tax of debt is 6.87%

Explanation:

Firm's after-tax cost of debt is calculated using the RATE function as follow:-

=RATE(nper,pmt,pv,fv)*(1-tax rate)

=(RATE(20*2,40,-894.87,1000)*2)*(1-25%)

=6.87%

Alexus [3.1K]3 years ago
5 0

Answer:

9%

Explanation:

The cost of debt is the yield to maturity of the bond. Yield to maturity is the annual rate of return that an investor receives if a bond bond is held until the maturity. it is long term return which is expressed in annual rate.

Number of payment = n = 40 payments

Coupon Payment = $1,000 x 8% /2 = $40

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

Yield to maturity = [ $40 + ( $1,000 - $894.87) / 40 ] / [ ($1,000 + $894.87) / 2 ] = 0.045

Yield to maturity = 4.5% semiannually = 9% annually

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You have agreed to paint your neighbor's house a lovely shade of chartreuse for $1500 and discover much to your dismay that the
Maslowich

Answer:

fixed price contract

Explanation:

Based on the information provided within the question it can be said that the neighbor most likely transferred risk with a fixed price contract. This refers to a contract that whose price is fixed at a set amount which does not depend on resources or time spent to complete the contract. Therefore it does not matter how much time or money the painter has to spend on tools, he must complete by the terms of the contract for the $1500 that were agreed upon.

4 0
3 years ago
In general, you will receive higher rates of interest on your certificate of deposit the ____ the maturity and the ____ the doll
ladessa [460]

Answer:

The answer is:

In general, you will receive higher rates of interest on your certificate of deposit the longer the maturity and the higher the dollar amount invested.

Explanation:

Interest rates are returns that an investor receive from their investment (under this situation - investment in certificate of deposit (CD)).

The higher the risk, the higher the return is required to compensate for the risk-taking of investor.

As long time commitment, that is long maturity, gives the investor higher exposure to risk and higher invested amount resulting to higher loss given default; investors will require higher return, that is - interest rate on CD, to compensate for their risk-taking.

Thus, longer and higher should be the correct choice to fill in the blank.

7 0
3 years ago
Assume that while the budget balance in Conania changes from positive to negative, capital inflow in Conania also decreases. How
Aleks [24]

Answer and Explanation:

In the case when the budget balance of the Conania varies i.e. from positive to negative so the capital inflow would decrease

Now this impact private investment spending in such a way that the situation would become worst and this would lead a serious crowding effect that ultimately reduce the economy

Hence, the same is relevant

4 0
3 years ago
Bonds ________ and stocks ________.
Sindrei [870]

Answer:

The correct words for the blank spaces are: are low-risk investments; are high-risk investments.

Explanation:

Bonds are considered to be <em>low-risk investments </em>compared to stocks because an interest rate fixed payment is made with bonds in regular periods. Instead, stocks are <em>high-risk investment</em>s since they payout dividends to stakeholders based on a company's profits implying investors will only earn a profit if the company has been able to earn income during a period. Even if that happens, the firms can retain the earnings for reinvestment.

7 0
3 years ago
Why is the GDP an important economic measurement?
telo118 [61]

Answer:

B

Explanation:

GDP is gross domestic product. meaning a total of all goods bought and sold in a country. this is not useful from an investment standpoint as the scope is to large. D is not true it measures only domestic not foreign product and.

8 0
3 years ago
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