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
krok68 [10]
3 years ago
11

Currently, Warren Industries can sell 20 dash year​, ​$1 comma 000​-par-value bonds paying annual interest at a 9​% coupon rate.

Because current market rates for similar bonds are just under 9​%, Warren can sell its bonds for ​$980 ​each; Warren will incur flotation costs of ​$20 per bond. The firm is in the 28​% tax bracket. a. Find the net proceeds from the sale of the​ bond, Upper N Subscript d. b. Calculate the​ bond's yield to maturity​ (YTM​) to estimate the​ before-tax and​ after-tax costs of debt. c. Use the approximation formula to estimate the​ before-tax and​ after-tax costs of debt.
Business
1 answer:
Rufina [12.5K]3 years ago
5 0

Answer:

a. Cash proceeds $960

b. Cost of Debt Before tax 9.4% and after tax 6.8%

c. Cost of Debt Before tax 9.39% and after tax 6.76%

Explanation:

a.

Cash proceed from the sale of bond is the net selling price and the floating cost of the bonds.

Cash proceed = Selling price - Floating cost = $980 - $20 = $960

b.

Yield to maturity is the annual rate of return that an investor receives if a bond bond is held until the maturity.

Yield to maturity = [ C + ( F - P ) / n ] / [ (F + P ) / 2 ]

Yield to maturity = [ $90 + ( $1,000 - $960 ) / 20 ] / [ ( $1,000 + $960 ) / 2 ]

Yield to maturity = 9.4%

Cost of debt before tax = 9.4%

Cost of debt after tax = 9.4% ( 1 - 0.28 ) = 6.8%

c.

Yield to maturity = [ C + ( F - P ) / n ] / [ (F + P ) / 2 ]

Yield to maturity = [ $90 + ( $1,000 - $960 ) / 20 ] / [ ( $1,000 + $960 ) / 2 ]

Yield to maturity = 9.39%

Cost of debt before tax = 9.39%

Cost of debt after tax = 9.19% ( 1 - 0.28 ) = 6.76%

You might be interested in
The three contemporary management perspectives are the ______ viewpoints.
Anastaziya [24]
The answer to this question is: <span>Sytems viewpoint, contingency viewpoint, and quality management
</span>System viewpoint refers to an approach to problem-solving that see the problem at a whole. Contingency viewpoint is a developmental effort that made into managerial approach, and quality management refers to the effort to maintain the standard result of our tasks
6 0
3 years ago
Read 2 more answers
16) If the supply of iPads increases, then
trasher [3.6K]

Answer:  The market demand curve for soft drinks will shift to the left and the market supply curve will shift to the left as well: equilibrium quantity will decrease and the equilibrium price may rise, fall, or remain the same. The graphs below illustrate this idea.

Explanation:

8 0
3 years ago
Although he is not sure about specific products, Diogo heads directly for a store selling Godiva Chocolates, because he knows th
Shalnov [3]

Answer:

brand awareness is the correct answer.

Explanation:

6 0
2 years ago
At the beginning of the period, a company reports a balance in office supplies of $450. During the period, the company purchases
Hoochie [10]

Answer:

Explanation:

Before passing the journal entry, first, we have to compute the total supplies consumed. The formula to compute the total supplies consumed is shown below:

= Beginning balance of supplies + Purchase of supplies - ending balance if supplies

= $450+ $3,400 - $900

= $2,950

Now the journal entry would be

Supplies expense A/c Dr   $2,950

      To Supplies A/c                            $2,950

(Being supplies consumed recorded)

4 0
2 years ago
Coffee shops that reward customers with one free cup of coffee after every ten coffee purchases are using a ___________ reinforc
sergiy2304 [10]

fixed-ratio, the discount is fixed ( a free coffee) and the number of cofees is fixed 10

6 0
3 years ago
Other questions:
  • Mr. pines thought ms. smith was the ideal employee. smith was an impressive person and attended all social functions of the comp
    11·1 answer
  • At September 1, 2017, Five-O Inc. reported retained earnings of $136,000. During the month, Five-O generated revenues of $20,000
    8·1 answer
  • Derst Inc. sells a particular textbook for $39. Variable expenses are $28 per book. At the current volume of 49,000 books sold p
    12·1 answer
  • A good system of internal controls requires that the physical custody of assets be separated from the accounting for those asset
    8·1 answer
  • Worldwide auction leader eBay started operations in Japan just five months after Yahoo! launched its Japanese auction service. B
    6·1 answer
  • Assume that Amazon has a stock-option plan for top management. Each stock option represents the right to purchase a share of Ama
    7·1 answer
  • Explain the concept of a Pereto Chart - provide an example - explain how the concept of the Pereto Chart might be used in making
    9·1 answer
  • How do you give brainliest?<br><br> I cant figure it out.
    6·2 answers
  • If you wanted to make sure a company has enough money available to pay its bills, which financial statement would
    5·1 answer
  • What is an advantage of working for a mom-and-pop establishment?
    6·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!