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
VARVARA [1.3K]
3 years ago
9

Tangshan Mining is considering issuing long-term debt. The debt would have a 30 year maturity and a 6 percent coupon rate and ma

ke semiannual coupon payments. In order to sell the issue, the bonds must be underpriced at a discount of 1 percent of face value. In addition, the firm would have to pay flotation costs of 1 percent of face value. The firm's tax rate is 21 percent. Given this information, the after-tax cost of debt for Tangshan Mining would be ________.
Business
1 answer:
Anon25 [30]3 years ago
5 0

Answer:

After tax cost of debt is 4.85%

Explanation:

The starting to computing the after tax cost of debt is to calculate the yield to maturity on the bond .

The yield to maturity on the bond can be computed using the rate formula in excel.

=rate(nper,pmt,-pv,fv)

nper is the time to maturity of 30 years multiplied by 2 since the bond is paying interest on semi-annual basis

pmt is the semi-annual interest receivable by investor which 6.0%/2*$1000=$30

pv is the current market price :$1000*98% =$980 (100-2%),1% deducted for discount,1% for issue cost

fv is the face value of $1000

=rate(60,30,-980,1000)

rate=3.07%

The 3.07%  is the semi-annual YTM, whereas the annual YTM 3.07% *2=6.14%

After tax cost of debt=YTM*(1-0.21)

                                    =6.14%*(1-0.21)

                                   =4.85%

You might be interested in
A key to positioning a product or brand effectively is discovering the perceptions of its potential customers. In determining it
Masja [62]

Answer:discover where the company's product or brand is on these attributes in the minds of potential customers.

Explanation: The position of a product in the minds of Customers or consumers is a vital factor in determining the sales that can be generated from the product. The perception of potential customers is necessary,so a good marketer or business organisations must ensure that it works to improve upon the perception of its customers concerning it's products or services.

discovering where the company's product or brand is on these attributes in the minds of potential customers is one of the four steps required.

8 0
3 years ago
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
puteri [66]

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%

6 0
3 years ago
Question 25
telo118 [61]

Answer:

False

Explanation:

6 0
3 years ago
The inventory turnover measures:
pashok25 [27]

Answer:

The average number of times inventory is sold during the period.

Explanation:

Inventory turnover by definition is the relationship between inventories and the cost of goods sold by a firm. It measures on average, how many times the inventory was restocked and sold in the operating period.

A higher number usually suggests a healthier operation cycle for a business.

It is measured by,

Inventory turnover = Cost of goods sold / Average inventory

Option 1 and Option 3 are related to the performance of accounts receivables. Option 3 is the closest to above mentioned definition. Option 4 is only measuring the inventory clearance time.

Hope that helps.

7 0
3 years ago
An investor enters into a short oil futures contract when the futures price is $15.5 per barrel. The contract size of 100 barrel
Nikolay [14]

Answer:

$150

Explanation:

Calculation to determine How much does the investor gain or lose if the oil price at the end of the contract equals $14.0

Using this formula

Gain or Loss =(Futures price- Ending contract)*Contract size

Let plug in the formula

Gain or Loss=$15.5 per barrel- $14.0* 100 barrels

Gain or Loss=$1.5*100

Gain or Loss=$150

Therefore How much does the investor gain or lose if the oil price at the end of the contract equals $14.0 will be $150

3 0
3 years ago
Other questions:
  • When a doctor anticipates and prepares for patients' objections to a new billing procedure, what type of control is she using?
    5·1 answer
  • If Hazel decides to sell the best ice cream on earth, and intends to establish a strong ethical climate in her organization, dur
    13·1 answer
  • ​(Market value​ analysis) Lei​ Materials' balance sheet lists total assets of $ 1.37 ​billion, $ 186 million in current​ liabili
    11·1 answer
  • Role of a veterinary doctor in rearing livestock effectively
    15·1 answer
  • Menu costs refers to a. the distortion in incentives created by inflation when taxes do not adjust for inflation. b. resources u
    12·1 answer
  • Can I use MemberPress to create and sell online courses?
    6·2 answers
  • Which of the following is a potential disadvantage when considering long-term loans as an option for raising capital?
    10·1 answer
  • A company’s resources are competitive assets that are owned or controlled by the company and include
    5·1 answer
  • The concept that people should pay taxes based on the benefits they receive from government services is called?.
    9·1 answer
  • a human resource professional comes up with a new way to recruit candidates for international positions that will result in more
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!