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larisa86 [58]
3 years ago
14

When a $1000 bond is initially sold at 5 percent "coupon" yield for 30 years, $50 (.05 x $1,000) interest per year is paid to th

e buyer of the bond. However, if interest rates decrease to 4 percent for similar bonds issued later on, then the market price of the initial bond will _________________ ..
Business
1 answer:
seraphim [82]3 years ago
7 0

Answer:

Increase.

Explanation:

We know,

Coupon rate > yield to maturity = Premium or > Market price

Here,

Coupon rate = 5%

Interest rate or YTM = 4%

From the formula,

We can say that as the coupon rate is greater than YTM, the market price of a $1000 issued bond will be increased. We can say that the bond is selling at a premium price because the interest rate is decreasing.

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Southern california publishing company is trying to decide whether or not to revise its popular textbook, financial psychoanalys
steposvetlana [31]

If the company requires a return of 10 percent for such an investment, calculate the present value of the project.

The present value of the project is $72349.51.

Since we consider only incremental cash flows for a project, we consider $21,600 for year one and calculate a 4% increase for each of the additional years.

We then calculate the Present Value Interest Factor (PVIF) at 10% for four years using the formula :

PVIF = 1 / [(1+r)^n]

Next, we find the product of the respective cash flows and PVIF for each year.

Finally, we find the total of the discounted cash flows for the four years to find the Present Value of the project.

8 0
3 years ago
Sheryl’s Shipping had sales last year of $10,000. The cost of goods sold was $6,500, general and administrative expenses were $1
Amiraneli [1.4K]

Answer:

What are earnings before interest and taxes?

To find this figure, we substract the cost of goods sold, general and administrative expenses, and depreciaction expense from the total sales:

Earnings Before Interest and Taxes (EBIT) = $10,000 - $6,500 - $1,000 - $1,000 = $1,500

What is net income?

To find the net income, we take the EBIT we found above, and substract from it the interest expense, which gives us the taxable income:

Taxable Income = $1,500 - $500

                           = $1,000

Now that we have the taxable income, we multiply this figure by the tax rate, to obtain the tax expense.

Tax expense = $1,000 x 35%

                      = $350

Finally, our net income is equal to the taxable income minus the tax expense:

Net Income = $1,000 - $350

                    = $650

What is cash flow from operations?

We add the non-cash expenses to net income to find this figure. In this case, we only have one non-cash expense: depreciation expense.

Cash flow from operations = $650 + $1,000

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8 0
3 years ago
Beswick company your team is allocated a project involving a major client, the beswick company. although the organization has ma
lianna [129]

Answer: A. low degree of substitutability.

Explanation:

Substitutability refers to the availability of alternative options to the variable in question. If something is said to be highly substitutable or to have a high degree of substitutability, then that means that it is easily replaceable because it has alternatives. The reverse holds true.

Therefore, Jamie can be said to have a low degree of substitutability because the client wants to deal with only him and if he is removed or unavailable, the company would not be able to deal with the client.

6 0
3 years ago
Walton Company has provided the following 2018 data:
timurjin [86]

Answer:

Walton Company

Income Statement

                                   Actual                Budgeted            Variances

Sales                          510,400                 $ 519,000              8,600 U

Variable product costs    183400             188,000                 4,600 F        

Variable selling expense   48100              46,000                  2,100 U

Other variable expenses  5100                  3,300                  1,800 U

Contribution Margin      273,800              281,700              7,900 unfav

Fixed product costs   15460                       15,700                  240 F

Fixed selling expense   22920                   23,400                 480 F

Operating Income      235420                    242,600          7,180  unfav

Other fixed expenses   1460                       1,300                 160 U

Interest expense            710                          800                   90 F      

Net income                 233,250                  240,500           7,250 unfav

We calculate the actual amounts from the budgeted amount by adding the variances when they are unfavorable and subtracting them when they are favorable . But in case of sales this is reversed. The actual sales are calculated by   subtracting unfavorable variance from budgeted sales.

The fav amounts are subtracted from the unfav amounts to get the results .

8,600 u + ( 4,600)F + 2,100 U +1,800= 7,900 unfav

                               

3 0
3 years ago
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