All categories

3 years ago

Telecom Systems can issue debt yielding 5 percent. The company is in a 30 percent bracket. What is its aftertax cost of debt?

Business

1 answer:

Alla [95]3 years ago

3 0

Answer:

after-tax cost odf debt 0.035 = 3.5%

Explanation:

the debt provides a tax shield for companies, as the interest expense, decrease the net income. Interest decrease income and therefore, the tax income associate with the income.

So the cost of debt with taxes is lower, because it lower the income tax expense

<u>the formula will be:</u>

cost of debt ( 1 - tax-rate)

0.05 ( 1 - 0.3) = 0.05 x 0.7 = 0.035

You might be interested in

Nina Corp. had the following net income (loss) the first three years of operation: $6,700, ($1,200), and $3,800. If the Retained

RoseWind [281]

Answer:

The total amount of dividends paid over these three years is $8,600

Explanation:

The computation of the total amount of dividend for three years is shown below:

= Net income for first-year - net loss for the second year + net loss for the third year - ending retained earning balance

= $6,700 - $1,200 + $3,800 - $700

= $8,600

As we know,

The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

So, we apply the same formula to compute the dividend amount

8 0

3 years ago

calculate the unadjusted rate of return for an investment that has a net cost of $430,000 and should provide an average after-ta

Elden [556K]

9%, as the unadjusted rate of return is equal to the average yearly net income growth rate divided by the initial investment's net cost.

<h3>Calculation:</h3>

$40,090 divided by $430,00 is.093 * 100, or 9%.

<h3>If the needed rate of return is 6%, what is the present value of a cash inflow of $2,000 five years from now? Examine later?</h3>

$2600 will be given to the recipient after five years.

<h3>If the internal rate of return is 5% and the desired rate of return is 6%, should management accept the investment opportunity?</h3>

No, as the internal rate of return on the investment is lower than the intended rate of return.

To know more about unadjusted rate visit:-

brainly.com/question/13037420

#SPJ4

3 0

1 year ago

Marx would most likely support a plan for (5 points)

alekssr [168]

Marx would most likely support A, government ownership of most production

8 0

3 years ago

Over the last year, Eli has been working very hard and his employer has taken notice by giving him a 6% raise in his salary. Dur

ELEN [110]

Answer:

b increased by 2%.

Explanation:

Increase in real wage = 6% - 4% = 2%

7 0

3 years ago

During 2021, its first year of operations, Pave Construction provides services on account of $124,000. By the end of 2021, cash

7nadin3 [17]

Answer:

The adjusting entry for uncollectible accounts on December 31, 2021:

Debit Bad debts expense $9,600

Credit Allowance for uncollectible accounts $9,600

Explanation:

During 2021, Pave Construction provides services on account of $124,000. By the end of 2021, cash collections on these accounts total $92,000.

The balance of uncollected accounts on December 31, 2021 = $124,000 - $92,000 = $32,000

Pave estimates that 30% of the uncollected accounts will be uncollectible.

Estimated uncollectible = 30% x $32,000 = $9,600

The adjusting entry for uncollectible accounts on December 31, 2021:

Debit Bad debts expense $9,600

Credit Allowance for uncollectible accounts $9,600

8 0

3 years ago