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spayn [35]
3 years ago
6

QRM, Inc.'s marginal tax rate is 35%. It can issue 10-year bonds with an annual coupon rate of 7% and a par value of $1,000. Aft

er $12 per bond flotation costs, new bonds will net the company $966 in proceeds. Determine the appropriate after-tax cost of new debt for the firm to use in a capital budgeting analysis.
Business
1 answer:
puteri [66]3 years ago
6 0

Answer:

4.87%

Explanation:

In this question , we are asked to calculate the appropriate after-tax cost of new debt for the firm to use in capital budgeting analysis.

PMT = 1000*7% = 70 (indicates the amount of interest payment)

Nper = 10 (indicates the period over which interest payments are made)

PV = 966 (indicates the present value)

FV = 1000 (indicates the future/face value)

Rate = ? (indicates the cost of debt)

After Tax Cost of Debt = Rate(Nper,PMT,PV,FV)*(1-Tax Rate) = Rate(10,70,-966,1000)*(1-.35) = 4.87%

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A proposed new project has projected sales of $195,000, costs of $92,000, and depreciation of $25,200. The tax rate is 25 percen
rusak2 [61]

Answer:

EBIT + Depreciation - Tax

= (195000-92000-25200) + 25200 - 19450

= $83,550

Top down OCF = EBIT - (EBIT * Tax) + Depreciation  

Top down OCF = (195000-92000-25200) - ((195000-92000-25200) * 0.25) +25200

Top down OCF = 77800 - 19450 + 25200

Top down OCF = $83,550

Tax shield OCF = (Sales - Exp) (1-tax) + (Dep * tax)  

Tax shield OCF = (195000-92000) (1-0.25) + (25200 * 0.25)  

Tax shield OCF = 77250 + 6300

Tax shield OCF = 83550

Bottom Up OCF = Net Income + Dep

Bottom Up OCF = (77800 * (1-0.25) + 25200

Bottom Up OCF = 83550

5 0
3 years ago
Following is a recent BusinessSoftware Corp. press release: REDMOND, Wash.—March 16, 2016 — BusinessSoftware Corp. today announc
Dimas [21]

Answer:

Explanation:

1. The journal entry for declaration of dividend is shown below:

Retained Earnings A/c Dr

= (8,600 million shares × $0.18 per share) = $1,548 million

          To Dividend payable in cash                                         $1,548 million

(Being dividend is declared)

2. No journal entry should be passed on the record date

3. The journal entry for payment of the cash dividend is shown below:

Cash dividend payable A/c Dr     $1,548 million

      To Cash                                                              $1,5480 million

(Being payment is made for cash dividend)

5 0
3 years ago
Suppose there is a simultaneous increase in demand and decrease in supply, what effect will this have on the equilibrium price?
Sunny_sXe [5.5K]

Although the impact on the equilibrium quantity cannot be determined, a rise in demand and a decrease in supply will result in an increase in the equilibrium price. 1. Consumers now place a higher value on goods, and producers must charge a higher price to offer the goods; as a result, prices will rise for all quantities.

If demand increases at the same time as supply increases, as is the case in the scenario depicted, the new equilibrium price will be greater than the initial equilibrium price.

We therefore know that an increase in supply decreases equilibrium price and increases quantity, while a rise in supply increases equilibrium price and decreases quantity (and vice versa) (and vice versa).

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5 0
2 years ago
Disadvantages of gap maps with example
Ganezh [65]

One of the most significant disadvantages of conducting a gap analysis or map is the loss of time and money. Typically, an organization will hire a consultant to conduct the assessment; however, participation takes valuable time away from project participants.

<h3>What is a gap analysis or map?</h3>

A gap analysis is a method of evaluating a business unit's performance to determine whether or not business requirements or targets are being met and, if not, what steps should be taken to meet them.

A gap analysis is also known as a needs analysis, a needs assessment or a need-gap analysis. Performing a skills gap analysis may increase your costs. This is due to the fact that employees frequently stop or interrupt their productivity while participating.

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4 0
1 year ago
A car dealer acquires a used car for $12,000, with terms FOB shipping point. Compute total inventory costs assigned to the used
bagirrra123 [75]

Answer:  

<h2>$13,070 </h2>

Explanation:  

The Cost of inventory = all cost of purchase; including costs of conversion and transfer.

Calculation of Inventory Cost FOB ship.  

Cost of Purchase $12,000  

Transportation-in       $100

Shipping insurance    $170

Car import duties      $800

Total Cost              $13,070

8 0
3 years ago
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