Answer: 10.13%
Explanation:
The after-tax return on the preferred shares would be:
= After-tax return + Premium required
= (8.8% * (1 - 25%)) + 1%
= 7.6%
For the preferred stock to be issued at par with the above after tax return:
= After tax return / ( 1 - tax)
= 7.6% ( 1 - 25%)
= 10.13%
Answer:
b. direct materials of $49,662, direct labor of $65,451, utilities of $10,121, and supervisor salaries of $14,900
Explanation:
The Supervisor's Salary is a fixed cost.
Therefore, a flexible budget for 13,900 units of production would show:
- Direct materials of $49,662,
- Direct labor of $65,451,
- Utilities of $10,121
- Supervisor salaries of $14,900
In the initial year, since I plan to put down $1000 and borrow $4000, then the inflow from the bank will be +$4000.
The timeline from my perspective will be:
Year 0
Cash flow +$4000
Year 1
Cash flow -$1000
Year 2
Cash flow -$1000
Year 3
Cash flow -$1000
Year 4
Cash flow -$1000
The timeline from the bank's perspective will be:
Year 0
Cash flow -$4000
Year 1
Cash flow +$1000
Year 2
Cash flow +$1000
Year 3
Cash flow +$1000
Year 4
Cash flow +$1000
I'm conclusion, it should be noted that the net cash flow for the bank in year 0 will be $-4000. This is the amount that was lent out by the bank.
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