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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

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3 years ago

When a company pays a dividend, it isn't as simple as getting a paycheck from one's employer. There are several critical dates i

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4. Ex-dividend date

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1. On the Declaration Date, the company's Director announces that they will pay a dividend as well as the amount of the dividend. This is recorded in the books by crediting it to Dividends payable.

2. On Payment day the dividends are disbursed amongst shareholders. Cash Account is credited and Dividends Payable is debited.

3. The Holder-of-record day is the day the company notes who the owners of it's stock are so that they may receive the dividend.

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3 years ago

A woman worked for 30 years before retiring. At the end of the first year of employment she deposited 5000 into an account for h

Mrrafil [7]

Answer:

$797,837

Explanation:

the first withdrawal is $50,000

the second is $51,500

and so on...

the formula that used to solve the interest rate earned by the annuity is:

$50,000 x {[(1 + i)³⁰ - (1 + 3%)³⁰] / [(1 + i)³⁰ x (i - 3%)]} x (1 + i) = $5,000 x {[(1 + i)³⁰ - (1 + 3%)³⁰] / (i - 3%)}

we start to simplify the equation by cancelling {[(1 + i)³⁰ - (1 + 3%)³⁰] / (i - 3%)}

[$50,000 x (1 + i)] / (1 + i)³⁰ = $5,000

now we cancel $5,000 on each side:

[10 x (1 + i)] / (1 + i)³⁰ = 1

now lets take away (1 + i):

10 / (1 + i)²⁹ = 1

things get a little bit more simple now:

10 = (1 + i)²⁹

²⁹√10 = ²⁹√(1 + i)²⁹

1.082636734 = 1 + i

i = 1.082636734 - 1 = 0.082636734 = 8.2636734%

now we replace i in any equation:

= $50,000 x {[(1 + 0.082636734)³⁰ - 1.03³⁰] / [(1 + 0.082636734)³⁰ x (0.082636734 - 0.03)]} x (1 + 0.082636734)

= $50,000 x {[10.82636738 - 2.427262471] / [10.82636738 x 0.052636734]} x (1 + 0.082636734)

= $50,000 x {8.399104909 / 0.56986462} x (1.082636734)

= $50,000 x 14.73877236 x 1.082636734

= $797,837

8 0

3 years ago