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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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Flauer [41]

Answer:

Aug 1 Cash $4000 Dr

Common Stock $4000 C

Aug 4 Prepaid Insurance $1500 Dr

Cash $1500 Cr

Aug 16 Cash $400 Dr

Service Revenue $400 Cr

Aug 27 Salary Expense $1000 Dr

Cash $1000 Cr

Explanation:

Aug 1. The transaction relates to owner's investment in the business/company thus we debit the cash coming into the business and credit common stock as both are increasing.

Aug 4. The insurance paid in advance is a current asset for the business. So, we debit the prepaid insurance account as the asset is increasing and credit the cash account as it is decreasing due to payment for insurance.

Aug 16. 400 received is the service revenue and as the revenue is increasing, we credit it. We are receiving cash so we debit the cash account.

Aug 27. The payment of salary is an expense and as expense is increasing, we debit the salary expense account and credit the cash account as cash is decreasing.

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4 years ago

What is NOT a reason a new product might fail?

3241004551 [841]

Appropriate channels selected is NOT a reason why a new product might fail.

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2 years ago

Because of the substitution problem, the cpi tends to overstate the true change in the price of the typical basket of consumer g

butalik [34]

It is true that because of the substitution problem, the CPI tends to overstate the true change in the price of the typical basket of consumer goods.

A consumer price index measures a market basket of goods and services that households have purchased at a weighted average price.
The measured CPI fluctuates to reflect changes in prices over time.

One of the most popular methods for determining inflation and deflation is the CPI.
An essential gauge of an economy's health is inflation. The CPI and other indexes are used by governments and central banks when making economic decisions.
The decision to raise or cut interest rates is crucial among these.

If the CPI increases, it indicates that the average rate of change in price over time has increased. The cost of living and income are eventually changed as a result of this.

Learn more about CPI here:

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1 year ago

Which of the following are characteristics of a perpetuity?

QveST [7]

Answer:

B. The value of a perpetuity is equal to the sum of the present value of its expected future cash flows.

C. The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distant (in the future) cash flows.

Explanation:

A Perpetuity is a financial instrument that pays the holder forever or in perpetuity. For example, a bank paying you $800 per year for ever because you invested $40,000.

There are certain characteristics

Option B

The Perpetuity like most financial Securities has its value based on the underlying cashflows that it can accumulate. This means that it's value is based on the present value of it's future cashflow so the other the cash payments, the higher the present value.

Option C.

As the discounted cashflows in the nearer future will be discounted less by the discount rate as opposed to the cash flows further in future, the cashflows nearer to the present in time will contribute more to the Perpetuity than the cashflows further in time.

For example using that first example, $800 per year at a rate of 5% will be discounted to $762 in the first year but in year 10 will be discounted to $491.

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3 years ago

When choosing a career, you should review the to find out whether or not there will be a demand for this profession in the years

Bond [772]

This is a true fact, what is the question though?

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3 years ago

Read 2 more answers