Quintina decided to increase the deduction percentage of her federal income tax rate from 14% to 16%. Quintina’s gross pay per m
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Answer:
a)$103.309 million initially b)$83.309 million c)240070 bonds more
Here is the complete question:
A firm with an A rating plans to issue one million units of a 10 year-4% bond with face value $100. After the financial crisis this firm is downgraded to a B rating. The yield curve increases 0.2% per year. The yield for year 1 is y1=1%, for year 2 is y2=1.2%, y3=1.4% and so on and y10=2.8%. The default spreads are given in the table below.
(a) What is the initial amount (before downgrading) the firm wants to raise?
(b) How much can this now B rated firm raise?
(c) If the firm wants to raise the planned amount, how many more bonds does it issue?
Rating Default spread
AAA 0.20%
AA 0.40%
A+ 0.60%
A 0.80%
A- 1.00%
BBB 1.50%
BB+ 2.00%
BB 2.50%
B+ 3.00%
B 3.50%
B- 4.50%
CCC 8.00%
CC 10.00%
C 12.00%
D 20.00%
Explanation: The explanation is found in the attachment
The residual income for the Division A of Magnolia Company for an income from operations of $80,000 will be $32,000.
<h3>What is residual income?</h3>Residual Income is the total of total income from operations less the minimum acceptable rate of return on the deployed assets for such operations over a financial period.
Using the above information, it can be ascertained that the residual income will be,
Hence, the residual income will be as computed above.
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