Answer:
<em>WACC 10.07765%</em>
Explanation:
We solve for the cost of debt by solving for the discount rate which makes the future coupon payment and maturity of the bond equal to 1,020
This is solved using excel or a financial calculator
C 32.50
time 34
<em>rate 0.03153274</em>
PV $672.0015
Maturity 1,000.00
time 34.00
<em> rate 0.03153274</em>
PV 348.00
PV c $672.0015
PV m $347.9985
Total $1,020.0000
<u>annual cost of debt:</u>
0.031532 x 2 = 0.063064 = 6.31%
<u>debt outstanding:</u>
5,000 bonds x $ 1,000 x 102/100 = 5,100,000
<u>equity</u>:
105,000 shares x $59 each = 6,195,000
For the equity we solve using CAMP
risk free = 0.05
market rate = 0.09
premium market = (market rate - risk free) 0.085
beta(non diversifiable risk) = 1.17
<u>Ke 0.14945</u>
Now we solve for the WACC
D 5,100,000
E 6,195,000
V 11,295,000
Equity weight 0.5485
Debt Weight 0.4515
Ke 0.14945
Kd 0.0631
t 0.34
<em>WACC 10.07765%</em>
Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.
Answer:
The after-tax cost of debt : 3.90%.
Explanation:
The semi-annual coupon = 1,000 x 5% /2 = $25.
The before-tax cost of debt, denoted as i, is the yield to maturity of the company's debt, which is calculated as below:
(25/i) x [1 - (1+i)^-40] + 1,000/(1+i)^40 = 854 <=> i = 3.147%.
=> Because the debt is semi-annual compounded, we have the: Effective annual rate = Before-tax cost of debt = ( 1+ 3.147%)^2 -1 = 6.39%.
=> After tax cost of debt = Before tax cost of debt x ( 1 - tax rate) = 6.39% x ( 1 - 0.39) = 3.90%.
So, the answer is 3.90%.
Answer and Explanation:
The computation of the income before tax in the year 2022 would be reduced or decreased by the cash discount amount i.e. shown below:
= Sale value × discount rate × number of units sold
= $40,000 × 1% × 14 units
= $5,600
Hence, the amount is $5,600
We simply applied the above formula so that the correct value could come
And, the same is to be considered
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