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3 years ago

10

Pepci co. is issuing a $1,000 par value bond that pays 7 percent annual coupon and mature in 15 years. Investors are expected to

pay $925 for the bond. The company is in a 40 percent tax bracket. What will be the firm’s after tax cost of debt?

1 answer:

prisoha [69]3 years ago

6 0

Answer:

1,678660

Explanation:

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It is important to identify and use only incremental cash flows in capital investment decisions:A) because they are the simplest

abruzzese [7]

Answer:

C) because ultimately it is the change in a firm's overall future cash flows that matter.

Explanation:

Under capital budgeting decisions, decisions are made with respect to addressing the questions like what is the benefit of selecting the project and investing on it.

If the answer to above question is raised income, then the project is selected. Accordingly the raised income in cash terms will be measured by increase in cash flows, that is incremental cash flows.

In simplest terms additional cash flows.

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A is the thing that an organization does best--something that draws customers to the company, is difficult to imitate, and opens

Ugo [173]

<u>Answer: </u>A is core competence

<u>Explanation:</u>

Core competence is the common term that is used by an organisation to define its multiple resources and skills that are not similar to any one else in the market. Core competence is also the strategic advantage that a business possess in the market.

The strength of the organisation helps it attract many customers and tap all the opportunities in the market at the right time to achieve success. The core competence of the organisation cannot be easily identified or imitated by the competitors in the market.

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3 years ago

If a market is semistrong-form efficient, this implies that above-average returns cannot be achieved by analyzing publicly avail

Shkiper50 [21]

Answer:True

Explanation:

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3 years ago

Safeco’s current assets total to $20 million versus $10 million of current liabilities, while Risco’s current assets are $10 mil

dlinn [17]

Answer:

b. The transactions would lower Safeco's financial strength as measured by its current ratio but raise Risco's current ratio

Explanation:

The formula to compute the current ratio is shown below:

Current ratio = Total Current assets ÷ total current liabilities

So,

For Safeco, the current ratio would be

= $20 million ÷ $10 million

= 2 times

And for Risco, the current ratio would be

= $10 million ÷ $20 million

= 0.5 times

After borrowing, the current ratio would be

The current assets and the current liabilities would be increased by $10 million in each side.

For Safeco, the current ratio would be

= $30 million ÷ $20 million

= 1.5 times

And for Risco, the current ratio would be

= $20 million ÷ $30 million

= 0.67 times

By comparing the current ratio, we get to know that The Safeco current ratio would be decreased whereas, the Risco current ratio is increased

Hence, option b is correct

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3 years ago

Cazden Motors' stock is trading at $30 a share. Call options on the company's stock are also available, some with a strike price

slava [35]

Answer:

d. If Cazden's stock price rose by $5, the exercise value of the options with $25 strike price would also increase by $5.

Explanation:

A call option confers a right, not an obligation upon the call buyer to buy a security at a pre determined price, known as exercise price or strike price at a future date.

A call buyer would exercise his right only in the scenarios wherein the strike price is lesser than the current market price on maturity.

Profit of a call buyer is given by = CMP as on expiry - Exercise/Strike price - Option premium paid

wherein CMP= Current Market Price

A call option is "in the money" when it's strike price is less than it's current market price. In the given case, it means if the CMP today represents CMP upon expiry, call buyer would exercise his right and his gain would be $5 i.e $30 - $25.

Since the $25 exercise option is "in the money", an increase in stock price by $5 will also increase the strike price by $5.

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3 years ago