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almond37 [142]
4 years ago
10

MAD Corp. has 20-year bonds with an 8% coupon rate and a 10% yield to maturity. What would be MAD's appropriate after-tax cost o

f debt if their tax rate is 40%? a. 8.0% b. 4.8% c. 6.0% d. 10.0%
Business
1 answer:
barxatty [35]4 years ago
7 0

Answer:

After-tax cost of deb = 6%

Explanation:

<em>The cost of debt is the required rate of return payable to investors in the debt instruments of a company. These investors include providers of long term debt finance to the company.</em>

<em>The cost of debt finance can determined by working out the yield to maturity on debt with adjustment for tax. </em>

<em>It is noteworthy that debt finance affords the company  a tax savings advantage because interest expense incurred on the use of debt of are tax deductible expense.</em>

After-tax cost of debt = (1- Tax rate) × before-tax cost of debt

Before tax cost of debt = 10%

Tax rate = 40%

After-tax cost of debt = (1-0.4) × 10% = 6%

After-tax cost of deb = 6%

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Answer:

B) $50,000

Explanation:

Cost of Capital is the rate which is required by the capital investment by the shareholders or owners of the business. Residual Income is the portion of net income after paying the investors of the company. This income is reinvested or retained by the business.

Net operating Income after tax = $100,000

Average Invested Capital = $500,000

Cost of Capital = $500,000 x 10% = $50,000

Residual Income = Net Income - Cost of capital

Residual Income = $100,000 - $50,000

Residual Income = $50,000

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3 years ago
Suppose that the government of Ping's country hears of the working conditions and the country seizes the Quality Dragon plant wh
ella [17]

Answer: a. expropriation

Explanation:

Expropriation happens when privately owned property are forcefully taken by government for it to be used by the general public. It is an act of depriving people of their right to property, although expropriation is to the advantage of the general public. In most countries especially in the US expropriation occurs when there is a need to embark on certain infrastructural project such as airports, railroads, etc.

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A random sample of 89 tourists in chattanooga showed that they spent an average of $2860 (in a week) with a standard deviation o
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Answer:

The complete question is given in the explanation box below and the solutions to the problem is shown in the pictures attached herewith accordingly. Thank you.

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The board of directors of Capstone Inc. declared a $0.90 per share cash dividend on its $2 par common stock. On the date of decl
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Answer:

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The journal entry to record the dividend declared is shown below:

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