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Yuliya22 [10]
3 years ago
12

ICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with seven years to maturity th

at is quoted at 116 percent of face value. The issue makes semiannual payments and has an embedded cost of 10.6 percent annually. What is the company’s pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Pretax cost of debt % If the tax rate is 40 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Aftertax cost of debt %
Business
1 answer:
attashe74 [19]3 years ago
6 0

Answer:

Explanation:

iate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Pretax cost of debt % If the tax rate is 40 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Aftertax cost of debt %

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When Patey Pontoons issued 6% bonds on January 1, 2018, with a face amount of $600,000, the market yield for bonds of similar ri
Sliva [168]

Answer:

<u>1.- issued at : </u>$579,378

<u></u>

<u>2.- the schedule is attached.</u>

<u></u>

<u>3 and 4.- journal entries</u>

cash                                     579,378 debit

discount on bonds payable 20,622 debit

         bonds payabe                        600,000 credit

--to record issuance-------

interest expense 20278.23 debit

        discount on bonds payable     2278.23 credit

        cash                                  18000 credit

--to record June 30th payment---

<u>5.-At December 31th 2018 will report as follow:</u>

bonds payable        600,000

discount on bonds    (15,986)

                           net 584,014

<u>6.- it will report interest expense for:</u>

20,278.23 June

20,357.97 December

total: 40.636,2‬

7.- maturity:

interest expense 20,898.55

discount on bonds payable 2,898.55

cash 618,000

Explanation:

For the value of the bonds at issuance, we will calcualtethe present value of the coupon payment and the maturity at market rate.

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C 18,000 ( 600,000 x 0.06/2)

time 8 (4 years x 2 payment per year

rate 0.035(market rate / 2)

18000 \times \frac{1-(1+0.035)^{-8} }{0.035} = PV\\

PV $123,731.1997

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity   600,000.00

time   8.00

rate  0.035

\frac{600000}{(1 + 0.035)^{8} } = PV  

PV   455,646.93

PV c $123,731.1997

PV m  $455,646.9337

Total $579,378.1334

for the schedule we will multuply the carrying value by the market rate.

the ncompare with the proceed in cash to know the amortizaiton.

This amortization will increase the carrying value of the loan.

5 0
3 years ago
You are considering an investment in a startup that will cost $100,000 but you will receive a cash inflow of $25,000 every year
bulgar [2K]

Answer:

Simple payback is 4 years

Total discounted Payback is more than the 5 years which is the payback cutoff period.

Explanation:

Payback period is the time period in which the project recovers the initial cost incurred. Lower the payback period the more beneficial will be the project.

Simple payback = $100,000 / $25,000 = 4 years

Discounted Payback

Discounted payback is calculated by using the present value of future cash flows.

Total discounted cash flows = 22935.78 + 21042.0 + 19304.59 + 17710.63 + 16248.28 = 97,241.28

As sum of all cash flows are less than the initial investment so, total discounted Payback is more than the 5 years which is the payback cutoff period.

8 0
3 years ago
Miller Fruit wants to expand its citrus grove operations. The firm estimates that it needs $8.6 million to buy land and establis
sergeinik [125]

Answer:

2.072 rights

Explanation:

Amount needed to buy the land = $8.6 million = $8,600,000

stock outstanding = 540,000

Market price per share = $34.80

subscription price = $33 a share

Now,

Number shares to be issued = ( Amount needed ) ÷ ( subscription price )

= $8,600,000 ÷ $33

= 260606.06 shares

1 rights will be issued per stock

thus,

number of rights required for purchase

= ( stock outstanding ) ÷ ( Number shares to be issued  )

= 540,000 ÷ 260606.06

= 2.072 rights

3 0
3 years ago
State and local crime rates are affected by citizens with gambling addictions.
ahrayia [7]
True
Hope this helps
4 0
3 years ago
Read 2 more answers
One type of systematic error arises because people tend to think of benefits in percentage terms rather than in absolute dollar
raketka [301]

Answer:

She is better off by $40,

Please kindly go through the explanation section for rest of the answers.

Explanation:

From the Question,

Grocery saving = 40%

Laptop saving = 2.5%

Absolute saving in grocery = $4

Absolute saving in Laptop =$10

Yes he should sacrifice 20 mins to save $10 since he does the same for less savings

Second case:

Since Ted is depositing money for only 6 months at 10% interest rate, he is giving up half his annual interest of (0.1*750)/2 = $37.5

Third case:

Interest accrued on student loan = 0.07*2000 = $140

Interest on credit card = $75 + (0.07*1500) = $180

She is better off by $40.

7 0
3 years ago
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