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
Marina CMI [18]
3 years ago
15

Rollins Corporation is constructing its marginal cost of capital (MCC) schedule. Its target capital structure is 30 percent debt

, 20 percent preferred stock, and 50 percent common equity. Its bonds have a 12 percent coupon rate of interest, semiannual interest payments, a current maturity of 20 years, and a market value equal to their par value of $1,000. The firm's marginal tax rate is 40 percent. What is Rollins' after-tax cost of debt?
Business
1 answer:
MrRissso [65]3 years ago
6 0

Answer:

The After Tax Cost of Debt = 0.072 or 7.2%

Explanation:

The question is to determine the After Tax Cost of Debt for Rolling Stone.

This is carried out as follows

Step 1: When we decide to calculate the Yield to Maturity, it should be noted that Market Value = Par Value

Therefore,

Coupon Rate which is the same as the Yield to Maturity (YTM) = 12%

Step 2: Based on this derivative, therefore,

After Tax Cost of Debt = Yield TO Maturity Rate (1-Marginal Tax Rate)

= 12% (1-40%)

= 0.12 (1-0.4)

The After Tax Cost of Debt = 0.072 or 7.2%

You might be interested in
A company is offering perpetual preferred stock (its dividend payments last forever) with a fixed annual dividend of $100. If yo
sukhopar [10]

Answer:

833.33

Explanation:

The fixed annual dividend is $100

The required rate of return on this investment is 12%

Therefore the value for each share can be calculated as follows

= 100/(12/100)

= 100/0.12

= 833.33

Hence the value for each share is 833.33

8 0
3 years ago
System testing:
yarga [219]

Answer:

C) tests the functioning of the system as a whole.

Explanation:

System testing refers to a process in which a complete system is evaluated to make sure that it works properly and fulfills the requirements. According to this, the answer is that system testing tests the functioning of the system as a whole.

The other options are not right because system testing doesn't separate components or programs as it involves the actual evaluation of the whole system to find defects and it is done before the acceptance testing.

3 0
3 years ago
Question 5 of 10
Basile [38]

Answer:

sorry:(

Explanation:

:)

3 0
2 years ago
The 2008 credit crunch occurred when banks reduced lending in response toa the loss of asset value for mortgage-backed securitie
rjkz [21]

Answer:

The correct answer is option a.

Explanation:

In 2007-2009 financial crisis occurred globally which originated in the US. It was triggered in the US because of the collapse of the housing bubble which caused the price of houses to decline.  

The housing bubble was backed by mortgages securities. The percentage of lower quality or subprime mortgages increase around 2004-06.  

This reduction in the asset value for mortgage securities caused the banks to reduce their lending as the debts on consumers and businesses were increasing.  

This caused the credit crunch in the year 2008.  

6 0
3 years ago
For the U.S. economy, money holdings are a
swat32

Answer:

C) small part of household wealth, and so the interest-rate effect is small.

Explanation:

During 2011 the per capita holdings of US dollars amount to only $2950, compared to the GDP per capita of $49,794 it is not a significant amount. Some government agencies estimate that nearly 2/3 of all $100 bills are held in foreign countries.

The decrease in money holdings can be attributed to an increase in the use of banking services, especially an increase in the use of debit cards, but also credit cards and checks.

6 0
3 years ago
Other questions:
  • The fact that financial services are more plentiful and easier to access means that
    14·1 answer
  • The primary difference between product markets and factor markets is that
    13·1 answer
  • Fiscal policy would be more effective if: a. crowding out occurred more often. b. the government could change taxes and expendit
    10·1 answer
  • At the beginning of the year, Nothing More, Corp., had a long-term debt balance of $36,554. During the year, the company repaid
    7·1 answer
  • Before a three-for-one stock split, the shares outstanding were 5,000 shares at $12 par.
    10·1 answer
  • Net worth is the difference between your assets and your liabilities
    5·1 answer
  • A decrease in input costs to firms in a market will result in a(n) _________________
    6·1 answer
  • Which type of reference group influence usage, while creating advertisements, has raised the most ethical concerns since it play
    8·1 answer
  • DJH Enterprises has 3 departments. Operating results for 2019 are as follows:
    7·1 answer
  • Many people who do not smoke cigars are bothered by the odor of cigar smoke. If private contracting is impossible, will too many
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!