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
gogolik [260]
3 years ago
11

A bond with a $1,000 par value sells for $895. The coupon rate is 7%, the bonds mature in 20 years, and coupon interest is paid

semi-annually. The tax rate is 35%. What is the aftertax cost of this debt?
Business
1 answer:
LuckyWell [14K]3 years ago
3 0

Answer:

After tax cost of debt is 5.239%

Explanation:

Given:

Face value = $1,000

Bond price = $895

Coupon payments = 0.035×1,000 = $35 (coupon payment is paid semi-annually so 7% is divided by 2)

Maturity = 20×2 = 40 periods

Using bond price formula:

Bond price = Present value of face value + present value of coupon payments

Use excel function =RATE(nper,pmt,PV,FV) to calculate cost of debt.

substituting the values:

=RATE(40,35,-895,1000)

we get Pre-Tax cost of debt = 4.03% semi- annual

Annual rate is 4.03%×2 = 8.06%

Note: PV is negative as bond price is cash outflow.

After tax cost of debt = 8.06(1 - 0.35)

                                     = 5.239%

You might be interested in
Match Group went public in November 2015. The company sold 33,333,333 shares at $12 per share. The underwriting spread was $0.66
kipiarov [429]

Answer:

5.5%

Explanation:

The underwriting spread = $0.66 per share

the percent underwriting spread = ($0.66 / $12) x 100 = 5.5%

The underwriting express is the fee that the underwriter of the stock (usually an investment bank) will charge the company for carrying out the transaction, either an IPO or simply issuing more stocks.

3 0
3 years ago
Greeting individual members of the audience before your presentation begins is an effective way to convey friendliness and confi
Nana76 [90]
Ngl I definitely think this is true :) if not then FRICKKKK I’m sooo sorry for getting it wrong
7 0
2 years ago
Read 2 more answers
Star Appliance sells previously owned appliances. Each appliance carries a one-year warranty against defects. Suppose that appli
lawyer [7]

Answer:

$1,500

Explanation:

Data provided in the question

Sales for the appliances for the entire month = $50,000

Expected future warranty cost = 3% of sales

By considering the above information, the amount that should be reported as a liability is    

= Sales for the appliances for the entire month × Expected future warranty cost

= $50,000 × 3%

= $1,500

Simply we multiplied the sales with the given percentage so that the liability amount could arrive

6 0
3 years ago
Choosing a car that costs __________ instead of a car that costs __________ means that you'll have less money available for othe
Savatey [412]

Answer: A. $8000; $7000

Explanation: If they spend more money, they will have less money for other purchases.

8 0
3 years ago
Without actually saying what was wrong with the program, beth alluded to
Natasha_Volkova [10]
Without actually saying what was wrong with the program, Beth alluded to walking around the space. Jerry is lucky with a lady and Beth recalls her childhood. After learning that a father of one her childhood friends, Tommy, is set to be executed for the murder of the said friend, Beth remembers how she tried to deal with his disappearance via imagining that he got lost in her imaginary international referred to as "Froopyland" and laughs at how stupid it becomes.
6 0
3 years ago
Other questions:
  • Kara and simon are both middle managers at gotcha international. kara is dissatisfied because she knows that simon makes more in
    8·1 answer
  • You are exploring a career in nursing in the state of MA. The average hourly wage for a RN is $33.37. You are planning to work 4
    13·1 answer
  • Content analysis is:
    15·1 answer
  • Define Moore’s Law and explain why its consequences are important to business professionals today. State how business profession
    6·1 answer
  • Suppose a local hardware store has explicit costs of $2 million per year and implicit costs of $44,000 per year. If the store ea
    6·1 answer
  • When a standalone organization is created and owned by two or more parent companies together, the strategic alliance is referred
    9·1 answer
  • A listing given to any number of brokers without liability to compensate any broker, except the one who first secures a buyer re
    7·1 answer
  • Sully Company provided the following information for last month. Production in units 3,000 Direct materials cost $7,000 Direct l
    14·1 answer
  • Taylor Entertainment Center has 5 TVs on hand at the balance sheet date that cost $400 each. The net realiz- able value is $350
    11·1 answer
  • Wilma is a salesperson with Broker Fred. Wilma arranges for a listing with a seller. When Fred accepts the listing, a contract a
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!