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Slav-nsk [51]
4 years ago
7

The Holmes Company's currently outstanding bonds have a 9% coupon and a 14% yield to maturity. Holmes believes it could issue ne

w bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt
Business
1 answer:
Wittaler [7]4 years ago
5 0

Answer:

10.5%

Explanation:

Holmes company currently have an outstanding bond of 9% coupon

They also have a 14% yield to maturity

= 14/100

= 0.14

The marginal tax rate is 25%

= 25/100

= 0.25

The after-tax cost of debt can be calculated as follows

After tax-cost of debt= Yield to maturity × (1-tax rate)

= 0.14× (1-0.25)

= 0.14×0.75

= 0.105×100

= 10.5%

Hence the after-tax cost of debt for Holmes company is 10.5%

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4 0
3 years ago
Virtual teams are characterized by ________ in comparison to teams which interact face-to-face.A) low popularity among companies
Georgia [21]

Answer:

B) low social rapport and direct interaction

Explanation:

Since this teams are usually not located in the same place. The rapport and the interaction is low.

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3 years ago
Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases
eimsori [14]

Answer:

The correct answer is $800

Explanation:

Giving the following information:

Fulbright Corp. uses the periodic inventory system.

Fulbright made the following purchases (listed in chronological order of acquisition):

· 40 units at $100

· 70 units at $80

· 170 units at $60

Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.

Ending inventory= [(100 + 80 + 60)/3]*10

Ending inventory= 80*10= $800

6 0
3 years ago
Question 4
mariarad [96]

Answer:

true

Explanation:

7 0
4 years ago
Read 2 more answers
For those brave enough to act effectively now to stabilise and protect your business and maintain liquidity, opportunity will co
FrozenT [24]

Answer:

1. Yes. Cash flows are able to illustrate liquidity.

2. Recommendations

a. Reducing levels of Inventory.

b. Negotiating Longer credit settlement period with suppliers.

Explanation:

One of the uses of a Cash flow Statement is its use in negotiating loans with bank and other lenders. Of interest to these parties is the liquidity of the entity.

Liquidity is the ability of an entity to honor its short-term obligations using its current assets. Liquidity is reflected in the Cash flow from Operating Activities of the Cash flow Statement.

<u>Recommendation</u>

Companies can maintain liquidity through reducing levels of inventory. Inventory ties up cash. Negotiating longer credit settlement period with suppliers can also increase liquidity.

5 0
3 years ago
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