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crimeas [40]
3 years ago
7

PackMan Corporation has semiannual bonds outstanding with nine years to maturity and the bonds are currently priced at $754.08.

If the bonds have a coupon rate of 7.25 percent, what is the after-tax cost of debt for PackMan if its marginal tax rate is 30 percent.
Business
1 answer:
EleoNora [17]3 years ago
8 0

Answer:

8.23%

Explanation:

Since this bond pays semi-annual coupons, it means that the payments occur every 6 months; making it 2 periods per year. Using a Financial calculator; enter the following inputs. If using TI BA II plus, key in the number first, then the function.

Total duration; N = 9*2 = 18

Face Value ; FV = 1,000 (use 1,000 if the value is not given)

Present value or price ; PV = -754.08

Semiannual Coupon Payment; PMT = Semiannual coupon rate *Face value

Semiannual Coupon Payment; PMT = (7.25%/2) *1000 = 36.25

The Yield to maturity;YTM is the <em>annual</em> pretax I/Y which is the Pretax cost of debt in this case

therefore, CPT I/Y = 5.875% (note: semi-annual rate)

Next, convert the semiannual rate to annual rate i.e the YTM;

= 5.875%*2

Pretax cost of debt (YTM) = 11.75%

Aftertax cost of debt = Pretax cost of debt (1-tax)

= 0.1175% (1-0.30)

= 0.08225 or 8.23%

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Sylvia Taylor stresses that a _______, which is a written statement of all the things a worker actually does and how he or she d
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Answer:

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Explanation:

A job description is defined as a written document that enumerates the duties that is expected from someone occupying a particular position.

Job description gives an employee a guide on how to effectively meet up with performance requirements in a position, since all key performance activities are enumerated.

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3 0
3 years ago
Your retirement account has a current balance of $50,000. You plan to add $6,000 a year to the account for each of the next 30 y
enot [183]

Answer:

21.45%

Explanation:

Remaining amount to have $1,000,000 = $1,000,000 - $50,000 = $950,000

Using the interest rate function RATE(nper,pmt,pv,fv) in the excel, we obtain an interest rate of 21.45%

Where,

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Note: Find attached the excel sheet to see result.

Download xlsx
4 0
3 years ago
QS 10-9 Bond retirement by call option LO P4 On July 1, 2017, Advocate Company exercises an $6,400 call option (plus par value)
vovikov84 [41]

Answer: The answer has been attached.

Explanation:

The journal is an accounting book that is used to record the transactions that take place in a business.

The entry to retire the bonds have been recorded. It should be noted that the bonds payable and the premium on

the bonds payable are debited while

the gain on the retirement of bonds and cash was credited.

Kindly, check attached file.

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3 years ago
As the Board of Governors of the American Red Cross considers planning, one option is to make strategic plans and then direct ma
n200080 [17]

Answer:

a. the environment is a dynamic one, and department and frontline managers can come up with more responsive plans than can central leadership.

Explanation:

If the organization is a dynamic system, it means that conditions change fast and often. In this case, a plan developed by top-management may not be adequate enough a month, or even a week later after being devised.

Therefore, it's best to allow frontline managers, who have knowledge about daily operations and conditions, to develop their own plans (with the assistance of the planning specialists), and to modifiy those same plans if needed.

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