During the interview process with both companies, Justin learns something about a new product that Big Box Co. Is producing that
1 answer:
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Answer:
9.73%
Explanation:
For computing the after tax cost of debt first we have to determine the cost of debt by applying the RATE formula i.e. to be shown in the attachment below:
Given that,
Present value = $604.42
Future value or Face value = $1,000
PMT = 1,000 × 8% ÷ 2 = $40
NPER = 20 years × 2 = 40 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this,
1. The pretax cost of debt is 6.95% × 2 = 13.9%
2. And, the after tax cost of debt would be
= Pretax cost of debt × ( 1 - tax rate)
= 13.9% × ( 1 - 0.30)
= 9.73%
Answer:
d) $56,000 decrease
Explanation:
In the case when parts are produced by sharp corporation
Given that
Total cost per unit = $36
Total cost = Total cost per unit × parts
= $36 × 8,000
= $288,000
Now
If the parts are Purchased by the outside supplier, fixed costs decreased by one-fourth.
So, three-fourth fixed costs should be incurred.
Now
Total cost per unit = Purchase Price + three - fourth fixed costs
= $28 + (3 ÷4) × $20
= $28 + $15
= $43
Now
Total cost = $43 × 8,000
= $344,000
So, the operating income is
= $288,000 - $344,000
= $56,000 decrease
