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3 years ago

Theâ€‹ after-tax cost of debt is higher than theâ€‹ before-tax cost of debt. True or False

Business

1 answer:

olasank [31]3 years ago

5 0

Answer:

False

Explanation:

The after cost of debt is always lower than the before tax cost of debt. For example, a company borrows $1,000,000 and pays 7% interest per year. This results in $70,000 in interest expense before taxes = $1,000,000 x 7% = $70,000.

The after tax cost of the debt = $1,000,000 x 7% x (1 - tax rate) = $1,000,000 x 7% x (1 - 21%) = $1,000,000 x 7% x 0.79 = $55,300

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What is the expected return if a firm has a payout ratio of 0.4, a return on equity of 25%, and a dividend yield of 6%

Varvara68 [4.7K]

Answer:

21%

Explanation:

We can calculate the expected return of a firm by add dividend yield and growth rate but in this question, the growth rate is not given therefore we will find growth rate first with the available data

DATA

Payout ratio = 0.4

Return on equity = 25%

Dividend yield = 6%

Solution

Growth rate = Return on equity x retention ratio

Growth rate = Return on equity x (1 - payout ratio)

Growth rate = 25% x (1-0.4)

Growth rate = 25% x 0.6

Growth rate = 15%

Expected return = Dividend yield + growth rate

Expected return = 6% + 15%

Expected return = 21%

6 0

2 years ago

At the beginning of the year, a firm had current assets of $121,306 and current liabilities of $124,509. At the end of the year,

Shtirlitz [24]

Answer:

change in net working capital = $21,903

Explanation:

given data

beginning current assets = $121,306

beginning current liabilities = $124,509

end of the year current assets = $122,418

end of the year current liabilities = $103,718

solution

we get here working capital at beginning that is express as

working capital = Current assets - current liabilities ......................1

put here value we get

working capital = $121,306 - $124,509

working capital = -$3203

and now we get here working capital for end of year that is

working capital = Current assets - current liabilities ......................2

working capital = $122,418 - $103,718

working capital = $18,700

so now we can get change in net working capital that is difference between beginning and ending working capital

change in net working capital = $18,700 - (-$3,203)

change in net working capital = $21,903

8 0

3 years ago

When there is no beginning Finished Goods Inventory and all the goods that are produced are sold, the operating income ________.

natali 33 [55]

Answer:

C) will be the same for both absorption costing and variable costing

Explanation:

If the beginning and ending balance for Finished Goods Inventory is 0, that means that all the absorption costs have been assigned and all the fixed costs (for variable costing) have been assigned also. So whatever costing method you choose the valuation should be the same.

4 0

3 years ago

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first qu

rosijanka [135]

Answer:

Option (a) is correct.

Explanation:

For February,

Opening inventory would have been:

= 25% of February

= (25% × $89,000)

= $22,250

Ending inventory would have been:

= 25% of March

= (25% × $59,000)

= $14,750

Hence,

Cost of goods sold = Opening inventory + Purchases - Ending inventory

$89,000 = $22,250 + Purchases - $14,750

Purchases = $89,000 + $14,750 - $22,250

= $81,500

Therefore, the budgeted purchases of inventory in February Year 2 would be $81,500.

4 0

3 years ago

Guidance and discipline strategies in emergency child care setting should ?

NeTakaya

As a licensed foster mom, the answer is F. All of above

4 0

2 years ago