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3 years ago

To calculate the after-tax cost of debt, multiply the before-tax cost of debt by ________________

Business

1 answer:

Lady_Fox [76]3 years ago

4 0

Answer:

To calculate the after-tax cost of debt, multiply the before-tax cost of debt by (1 - tax rate).

Water and Power Company (WPC) can borrow funds at an interest rate of 10.20% for a period of four years. Its marginal federal-plus-state tax rate is 45%. WPC's after-tax cost of debt is = 10.20% x (1 - 45%) = 5.61%.

At the present time, Water and Power Company (WPC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,329.55 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. If WPC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)?

B. 4.47%

pre-tax cost of debt = bond's yield to maturity

approximate YTM = {120 + [(1,000 - 1,329.55)/15] / [(1,000 + 1,329.55)/2] = 98.03 / 1,164.775 = 0.08416 = 8.416%

approximate after tax cost of debt = 8.4% x (1 - 45%) = 4.62 = 4.62

since I used the approximate yield to maturity, my answer is not exact. That is why I have to look for the closest available option.

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In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion. In year 2, the

julia-pushkina [17]

Answer:

The correct answer is option (C).

Explanation:

According to the scenario, the given data are as follows:

Base year basket price = $5,000 billion

Year 2 basket price = $5,500 billion

So, we can calculate the consumer price index by using following formula:

Consumer price index = (Year 2 basket price ÷ Base year basket price ) × 100

By putting the value, we get

Consumer price index = ( $5,500 ÷ $5,000 ) × 100

= 1.1 × 100

= $110 billion

5 0

4 years ago

Evaluate Microsoft’s product and marketing evolution over the years. What has the company done well, and where did it falter?

OverLord2011 [107]

Explanation:

Microsoft is a giant technology company with worldwide influence.

Its success and reputation have ensured the company the position of the most valuable company in the world by market capital.

The popularization of the Windows Operating System, worldwide, was the product that consolidated the company as a giant in the business world. Technological companies, should focus on innovation, as each day more advances in technology appear to correct possible system errors, make the user's performance and use better and make production costs cheaper. With regard to the Operating System for computers, Microsoft has always evolved in launching new, more evolved versions, and making the previous ones obsolete for use, but one of the company's failures was to have lost the timing to develop an OS aimed at the use in cell phones, since that the company tried to enter this market, but was unsuccessful, and was defeated by its biggest competitors: Google and Apple.

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4 years ago

A consumer downloads 4 movies and 3 apps per week. Suppose the price is $4 per movie and $4 per app, and the marginal utility th

77julia77 [94]

Marginal utility will be calculated for movies by: 14/(4*4) which would mean 0.875 utils per dollar per movie. Whereas, for apps, it would be: 8/(3*4) which would mean utils per dollar per app to be 0.667. Hence, movies tend to carry higher utility.

3 0

3 years ago

This occurs when one party repeatedly holds out for a better deal.

Debora [2.8K]

A breakdown in bargaining happens when one party repeatedly holds our for a better deal. In this cases, private solutions to this kind of externalities is deemed necessary. Though bargaining is quite common among transactions made by economists, it cannot be helped that there are certain problems that arise from this.

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4 years ago

Evergreen Corporation distributes land with a fair market value of $200,000 to its sole shareholder. Evergreen's tax basis in th

Lady_Fox [76]

Answer:

True

Explanation:

As for calculating the gain or loss on distribution of any asset, in any case the company shall consider the fair market value at the time of distribution, and accordingly, the gain or loss shall be:

Fair market value - Tax basis of such asset.

Here, in the given instance

Fair market value of land = $200,000

Tax basis of land = $50,000

Thus, gain on distribution = $200,000 - $50,000 = $150,000

This will not be different in any case, whether the earnings are positive or negative.

Therefore, the statement is True

4 0

3 years ago