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shutvik [7]
3 years ago
6

Andrew Industries is contemplating issuing a 30​-year bond with a coupon rate of 7.00 % ​(annual coupon​ payments) and a face va

lue of $ 1 comma 000. Andrew believes it can get a rating of A from Standard​ & Poor's.​ However, due to recent financial difficulties at the​ company, Standard​ & Poor's is warning that it may downgrade Andrew​ Industries' bonds to BBB. Yields on​ A-rated, long-term bonds are currently 6.50 %​, and yields on​ BBB-rated bonds are 6.90 %.A. What is the price of the bond if Andrew Industries maintains the A rating for the bond​ issue?
B. What will be the price of the bond if it is​ downgraded?
Business
1 answer:
erik [133]3 years ago
8 0
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Masja [62]

Answer: $8,600

Explanation:

Implicit cost is also known as the opportunity cost which means that it is the benefit of the next best alternative that was foregone when the current decision was made.

The implicit cost here is therefore:

The $8,000 that Charles could have been making as a lifeguard.

The interest per year he could have been earning on the $5,000 he used to buy mowing equipment.

The depreciation on the mowing equipment because depreciation is not an explicit cost but an implicit one.

= 8,000 + (2% * 5,000) + (10% * 5,000)

= 8,000 + 100 + 500

= $8,600

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3 years ago
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C $975 as you minus rent etc from the revenue
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elena-s [515]

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LekaFEV [45]

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Bill is probably a(n)

SBU manager.

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a. licensor

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