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Serggg [28]
3 years ago
7

​(Individual or component costs of​ capital) Compute the cost of capital for the firm for the​ following: a. A bond that has a ​

$1 comma 000 par value​ (face value) and a contract or coupon interest rate of 11.4 percent. Interest payments are ​$57.00 and are paid semiannually. The bonds have a current market value of ​$1 comma 120 and will mature in 10 years. The​ firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a ​$1.82 dividend last year. The​ firm's dividends are expected to continue to grow at 6.5 percent per​ year, forever. The price of the​ firm's common stock is now ​$27.22. c. A preferred stock that sells for ​$142​, pays a dividend of 8.8 ​percent, and has a​ $100 par value. d. A bond selling to yield 11.9 percent where the​ firm's tax rate is 34 percent.
Business
1 answer:
Irina-Kira [14]3 years ago
5 0

Answer:

The requirement is to calculate the cost of each finance instrument whose details were given in the question:

after tax cost of debt is 6.28%

cost of equity is 13.63%

cost of preferred stock is 6.20%

after tax cost of debt is 7.85%

Explanation:

1. after cost of debt:

The pretax cost of debt can be determined using the rate formula in excel:

=rate(nper,pmt,-pv,fv)

nper is the number of coupon payments the bond would make i.e 10*2=20

pmt is given as $57

pv is the current price of the bond $1120

fv is the par value of $1000

=rate(20,57,-1120,1000)=4.76%(semi-annually)

=9.52% annually

After cost of debt =9.52%*(1-0.34)=6.28%

2. cost of equity

share price=Do*(1+g)/r-g

r is the cost of equity

r=Do*(1+g)/share price+g

r=$1.82*(1+6.5%)/$27.22+6.5%

r=(1.94/27.22)+6.5%=13.63%

3. cost of preferred  share=dividend/market price

dividend=8.8%*$100=$8.8

market price is $142

cost of preferred share=$8.8/$142=6.20%

4.after tax cost of debt

pretax cost of debt is 11.9%

tax rate is 34%

after tax cost of debt =11.9%*(1-0.34)=7.85%

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Hope these help!!!




4 0
3 years ago
WRITE A IMPORTANT SENTANCE ABOUT EACH PARAGRAPH AND NUMBER IT PLS AND ILL GIVE YOU BRAINLIEST....DONT RESTATE THE SENTANCES
erastova [34]

Answer:

1. Omar Ndiaye is a basketball player at Northern Arizona University. He is just as skillful as his teammates, but the only difference is that he plays with one hand.

2. Basketball is a sport with 5 players on the court on each team. Basketball players have to dribble, pass, and shoot, as well as having good reactions and good communication skills. It can be found in Australia, Canada, Germany, Mexico, the U.S., as well as many other countries.

3. The chances of Ndiaye becoming a basketball player was particularly low because he was born without a right hand. But that never stopped him.

4. People are amazed at the things he can accomplish with one hand.

5. As a kid, Ndiaye tried out a lot of sports including, soccer and swimming. He also tried basketball trying to figure out ways on how to play it with one hand.

6. Without thinking too much about how to do it, he just did it.

7. He practiced over and over until it became second nature to him.

8. All the practice did pay off. He was one of the best where he lived. Yet again, people were mesmerized.

11. Ndiaye supported his teammates by being him.

12. When people see Ndiaye working hard with one hand, it motivates them to work harder.

13. He also inspires the kids at youth basketball camps.

14. People questioned Ndiaye about how he did it, he says, "I always let them know if they have confidence in themselves they can do anything."

15. After college, Ndiaye plans to become a motivational speaker because he has a lot to tell people with his story.

Explanation:

Hope this helps. Sorry, it took a while. :)

5 0
2 years ago
Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received
aleksley [76]

Answer:

A. $11,970

B. $11,890

C. January

Explanation:

a. Calculation for the after-tax cost if Isabel pays the $19,000 bill in December

After-tax cost=$19,000 - ($19,000 x 37%)

After-tax cost= $19,000 - $7,030

After-tax cost= $11,970

Therefore the after-tax cost if Isabel pays the $19,000 bill in December will be $11,970

b. Calculation for the after-tax cost if Isabel pays the $19,000 bill in January

First step is to calculate the cost before taxes

Cost before taxes = $19,000 - ($19,000 x 8%/12) Cost before taxes= $19,000 - $127

Cost before taxes= $18,873

Now let calculate the After-tax cost

After-tax cost = $18,873 - ($18,873 x 37%)

After-tax cost= $18,873 - $6,983

After-tax cost = $11,890

Therefore the after-tax cost if Isabel pays the $19,000 bill in January will be $11,890

c. Based on the above calculation for both a and b, Isabel should pay the amount of $19,000 bill in January reason that it has the lowest cost of debt of the amount of $11,890 compare to December which has the cost of debt of the amount of $11,970.

5 0
2 years ago
Cost behavior refers to the methods used to estimate costs for use in managerial decision making. True False
bazaltina [42]

Answer:

True

Explanation:

It's A.A because it makes more sense then b Falsehood

8 0
2 years ago
List at least six possible areas that might be included on an externship evaluation form.
Gwar [14]

Answer:

•Initiative

•Administrative task

•Maturity

•Appearance

•Attitude

• Dependability

Explanation:

Externship is a programme offered to college students which forms part of their work experience in relation to their course of studies. It affords student to have work experience during their educational study.

The externship evaluation form is a form used by supervisors to assess the performance of students who have undergone externship programme. It contains areas such as how matured is the student on the job, gives explanation of the student's appearance throughout the programme. It also confirms whether the student is dependable based on his experience during the programme, how well the student makes use of his initiative without being told what to do etc.

8 0
2 years ago
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