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Georgia [21]
3 years ago
5

Gargoyle Unlimited Gargoyle Unlimited is planning to issue a zero coupon bond to fund a project that will yield its first positi

ve cash flow in three years. That cash flow will be sufficient to pay off the entire debt issue. The bond's par value will be $1,000, it will mature in 3 years, and it will sell in the market for $727.25. The firm's marginal tax rate is 40 percent. Refer to Gargoyle Unlimited. What is the expected after-tax cost of this debt issue
Business
1 answer:
asambeis [7]3 years ago
5 0

Answer:

The answer is 6.72%

Explanation:

Calculating the imputed rate from a discount bond as follows:

( 1 + i  )^n = FV / PV  

( 1 + i )^3 = FV / PV,   here FV= 1000 and PV= 727.25

so putting values in equation we have:

( 1 +i )^3 = 1000 / 727.25  

( 1 + i )^3 = 1.375  

solving for i

( 1 + i) = 1.375^1/3  

( 1 + i ) = 1.112  

i = 0.112 before tax rate

0.112 * (1 - tax rate) = after tax interest rate

0.112 * .60 = 0.0672 = 6.72%

thus the expected after tax cost of this debt issue is 6.72%

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HI Corporation is considering the purchase of a machine that promises to reduce operating costs by the same amount for every yea
Alexus [3.1K]

Answer:

Annual savings = 61,746.

Explanation:

The Net Present Value (NPV) is the difference between the present value (PV) of cash outflows  and PV of cash inflow

At the internal rate of return the PC of annual cash savings will be equal to the investment cost

Initial cost = 211980

PV = annual cash savings = A× (1- (1+r)^(-n)/ r

A=?  r-internal rate of return, 14%, n-number of years- 5

211980 = A  (1- (1.14)^(-5)/ 0.14

211,980 = A× 3.433080969

A= 211,980/3.43308

A= 61746.28619

Annual savings = 61,746.

5 0
3 years ago
Buying food to feed your family, a lawn mower to care for your lawn, or a car to drive yourself to work are purchases with what
Nata [24]

Answer:

Rational Motive

Explanation:

A rational motive is the willingness to make an action based on logical and rational criteria

4 0
2 years ago
4) Which of the following is least likely to be your primary health care provider?
Lelechka [254]
An allergist cannot be a primary care provider.
7 0
3 years ago
ABC reports dividends per share of $1.40 and net income for the year of $140,000. The current stock price is $14.00. What is ABC
Virty [35]

The ABC's dividend yield when the ABC reports dividends per share of $1.40 and net income for the year of $140,000. The current stock price is $14.00 is 10%.

<h3>What is yield?</h3>

The yield on a security is defined as the measurement of the ex-ante instrument to a safety holder in financing.

It is a cardinal part of the return on an investment, with some other being the change in the security's market price.

The formula of calculating the yield is:

\text{Dividend Yield} =\dfrac{ \text{Dividend Per Share}}{\text{Current Stock Price}} \times 100

According to the given information,

Dividend Per Share= $1.40,

Net Income= $1,40,000

Current Price= $14

Now, apply the formula in the given formula,

\text{Dividend Yield} =\dfrac{ \text{Dividend Per Share}}{\text{Current Stock Price}} \times 100\\\\\text{Dividend Yield} =\dfrac{1.40}{\$14}\times 100\\\\\text{Dividend Yield} =10\%

Therefore,  ABC's dividend yield is 10%.

Learn more about yield, refer to:

brainly.com/question/2506978

#SPJ1

5 0
1 year ago
Grant Company gathered the following reconciling information in preparing its July bank reconciliation:
never [62]

Answer:

The answer is $4,160

Explanation:

Cash balance per book contains the items already in the bank statement with the bank and not in the cash book with Grant company.

GRANT COMPANY

Adjusted cash balance per book July31

Cash balance per books $3,500

Notes receivable and interest

collected by bank. $850

Bank charge for check printing ($20)

NSF check ($170)

Adjusted cash balance per books $4,160

3 0
3 years ago
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