Answer:
5.6%
Explanation:
A lot of information is missing, so I looked for similar questions to fill in the blanks:
"Outstanding debt of Home Depot trades with a yield to maturity of 8%.
The tax rate of Home Depot is 30%.
What is the effective cost of debt of Home Depot?"
the effective cost of debt or after tax cost of debt = debt's yield to maturity x (1 - tax rate) = 8% x (1 - 30%) = 8% x 0.7 = 5.6%
Interest is tax deductible, therefore, it creates a tax shield that lowers net interest expense.
Answer:
Total PV= $2,298.24
Explanation:
<u>First, we need to determine the effective annual rate:</u>
EAR= [1 + (i/n)]^n - 1
EAR= [1 + (0.08/4)]^4 - 1
EAR= 0.082
<u>Now, we can determine the present value of the cash flow, using the following formula:</u>
PV= ∑[Cf/(1+i)^n]
Cf1= 800 / 1.082= 739.37
Cf2= 800 / 1.082^2= 683.34
Cf3= 0
Cf4= 1,200 / 1.082^4= 875.53
Total PV= $2,298.24
The overall return on investment for the Hernandezes is $7038.
<h3>What is the return on investment?</h3>
Return on investment (ROI) or return on costs (ROC) is a time-dependent ratio of net income to investment (costs resulting from an investment of some resources at a point in time). A high ROI shows that the benefits outweigh the expenses of the investment. ROI is a performance indicator that is used to measure the effectiveness of an investment or to evaluate the efficiencies of many investments. What is considered a "good" ROI depends on factors such as the investor's risk tolerance and the time it takes to recoup their investment. All other things being equal, risk-averse investors may accept lower returns if they take less risk. Similarly, an investment that takes a long time to pay back needs a higher ROI to be attractive to investors.
The most common way to calculate is: net income divided by total investment cost
ROI = net income / investment cost x 100.
To learn more about the return on investment, click
brainly.com/question/13575981
#SPJ1
Market equilibrium occurs where quantity demands equals quantity supplied
Answer:
a.
Current Share Price = $87.5
c.
The new market value is $77.78
Explanation:
a.
The dividend per year on the preferred stock = 100 * 0.07 = $7
The yield on the preferred stock can be calculated as,
Yield = Preferred dividend / Current Share price
As we know the Yield and the dividend, we can calculate the current share price.
0.08 = 7 / Current Share price
Current Share Price = 7 / 0.08
Current Share Price = $87.5
c.
The dividend per share on the preferred stock remains the same at $7. The new yield is 9%. Using the yield formula we can calculate the new share price,
0.09 = 7 / New Share price
New Share Price = 7 / 0.09
New Share Price = 77.78
