1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Elenna [48]
2 years ago
7

To help finance a major expansion, Top Fashion Company sold a noncallable bond several years ago that now has 20 years to maturi

ty. This bond has a 8.0% annual coupon, paid semiannually, sells at a price of $1,050, and has a par value of $1,000. If the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation? 4.51% 4.68% 3.95% 5.24% 4.80%
Business
1 answer:
Basile [38]2 years ago
3 0

Answer:

4.51%

Explanation:

First, find the yield to maturity(YTM) of the bond; this would be the pretax cost of debt.

Using a financial calculator, input the following;

Face value of the bond ; FV = 1000

Semiannual coupon payment; PMT = (8%/2)*1000 = 40

Present value of bond; PV = -1050

Time to maturity; N = 20*2 = 40 semiannual payments

then compute semi-annual interest rate ; CPT I/Y = 3.756%

The pretax cost of debt = 3.756% *2 = 7.51%

After tax-cost of debt is used for WACC calculation and is therefore as follows;

7.51%(1-0.40) = 4.51%

You might be interested in
__________ is credited with being the first restaurant to franchise.
Mazyrski [523]
During 1850,Frederick Henry Harvey is the one founded the first restaurant chain in the U.S. The first of the Harvey House restaurants opened in 1876, in a terminal of the Atchison, Topeka & Santa Fe Railroad. In 1887, there was a Harvey House restaurant in every 100 miles along the 12,000‑mile‑long Atchison, Topeka & Santa Fe line. He strongly believe that quality control established is the reason why regular field visits to his restaurants, and provided services similar to those used today by franchisors
3 0
3 years ago
after an unsuccessful attempt to train her puppy one morning sharon the office manager scolds her assistant when she arrives for
elena55 [62]
What are the options

7 0
3 years ago
ABC Hospital invests $5,095,000 in a joint venture with a reputable oncology group and the hospital agrees to a 55% interest in
Vsevolod [243]

Answer:

Year Cash Flow Cumulative Cash flow Discounted Cash Flow(8.9%) 0 $5,095,000 $5,095,000 $453,455 1 $1,500,000 $3,595.000 $3,141,5452 $3,000,000 $ 595,000 $141,5453 $4,500,000 ($3,905,000) $3,4515454 $6,500,000ABC Hospital will get ROI in 3 years, this option I would recommend to the CEO.

Subscribe to unlock

8 0
3 years ago
While inserting an array function the excel user must press
hichkok12 [17]

Control+Shift+Enter

Array functions in excel are powerful tools sometimes refereed to as "CSE" functions because you have to press Control+Shift+Enter in order to enter them in your worksheet.

6 0
3 years ago
When the Fed buys​ $100 worth of bonds from a primary​ dealer, reserves in the banking system A. increase by more than​ $100. B.
ruslelena [56]

Answer:

The correct answer is D.

Explanation:

The fed buys $100 worth of bonds from a primary dealer. The fed will pay the dealer for these bonds. This will cause an increase in the total reserves by $100. The money supply will increase by more than $100. The extent of increase in the money supply depends on the required reserve ratio. This is an example of an expansionary monetary policy.

4 0
3 years ago
Other questions:
  • Christine is an artist who creates custom cookie jars. Her annual revenue from selling the cookie jars is $90,000. The annual ex
    11·1 answer
  • Suppose the annual rate of inflation has been 3 percent during each of the last three years and that borrowers and lenders have
    8·1 answer
  • If teamwork and support are high on your priority list, a _______ may be a poor choice for a business
    14·2 answers
  • which of the following helps economists judge the overall condition of a particular country's economy?
    15·1 answer
  • Six years ago, Bradford Community Hospital issued 20-year municipal bonds with a 7 percent annual coupon rate. The bonds were ca
    10·1 answer
  • Value is the perception by consumers that a band provides satisfaction greater than the cost incurred to acquire the product or
    14·1 answer
  • MC Qu. 114 Lowden Company has an overhead application... Lowden Company has an overhead application rate of 155% and allocates o
    11·1 answer
  • Which is true of payment history and it’s relation to credit reports
    5·1 answer
  • When the university’s provost sets a major student retention goal, the cascading-goals process would occur if the.
    12·1 answer
  • Open this link to read more about how credit card interest works. Use this information to calculate the cost of your computer wh
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!