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
olga_2 [115]
3 years ago
14

A company is going to issue a $1,000 par value bond that pays a 5% annual coupon. The company expects investors to pay $684.5 fo

r the 20-year bond. The expected flotation cost per bond is $50, and the firm is in the 45% tax bracket. Compute the firm's after-tax cost of new debt. Round your calculations to the nearest 0.01%. Group of answer choices
Business
1 answer:
Sliva [168]3 years ago
5 0

Answer:

After tax cost of debt is 4.96%

Explanation:

In order to compute the after-tax cost of debt, the yield to maturity to maturity which is pre-tax cost of debt needs to determined first of all using the rate formula in excel as provided below:

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

nper is the time to maturity of the bond which is 20 years

pmt is the annual coupon receivable by investors $1000*5%=$50

pv is the current price of the bond less flotation cost per bond i.e($684.5-$50)=$634.5

fv is the future value of $1000 per bond

=rate(20,50,-634.5,1000)

rate=9.01%

after tax cost of debt=rate*(1-tax rate)

                                   =9.01% *(1-0.45)

                                    =4.96%

You might be interested in
The Gardner Company expects sales for October of $247,000. Experience suggests that 40% of sales are for cash and 60% are on cre
LenKa [72]

Answer: $74100

Explanation:

Based on the information given, the amount of cash expected to be collected in October will be calculated thus:

October, credit sales will be:

= 60% x $247000

= $148200

Since the amount that'll be collected in October will be 50% of the credit sales. This will be:

= 50% × $148200

= $74100

6 0
2 years ago
Cash Flows from Operating Activities—Indirect Method The net income reported on the income statement for the current year was $1
KiRa [710]

Answer:

Explanation:

26262

8 0
3 years ago
For the U.S. soft drink market, of the 300 million people in the U.S., 80% of the population is the maximum number of consuming
neonofarm [45]

Answer:

Annual market potential = $85,848 millions

Explanation:

The annual market potential is the expected sales value for the soft drink product  for a year should the maximum number of potential consumers purchase the product at the average price.

Annual market potential = Average price × No of consuming unit × consumption rate per annum

Maximum number of consuming unit = 80%× 300 million =240 million

Consumption rate per buyer per annum = 365

Average price = $0.98

Annual market potential ($) = 0.98× 240× 365 =$85,848 millions

Annual market potential = $85,848 millions

6 0
3 years ago
How is the dual credit program different from the AP program?
olga55 [171]

AP courses are part of the College Board organization that requires students to take a rigorous test at the end of the course to potentially earn college credit. A dual credit course on the other hand is an official course at Loyola University Chicago.

3 0
3 years ago
Read 2 more answers
Barb's Bakery made $200 last month selling 100 loaves of bread. This month it made $300 selling 60 loaves of bread. What is the
Virty [35]
The answer will be 150 dollars
5 0
3 years ago
Other questions:
  • Patricia hires Albert to sell Patricia's expensive sports car. Albert agrees on a sale with Zeke, who wants to purchase the car
    9·2 answers
  • Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The
    10·1 answer
  • Assume that the market is originally in equilibrium. Now suppose that this product gains a sudden popularity among consumers. Ho
    7·1 answer
  • Which value gap refers to a company’s failure to accurately assess what customers really want?
    9·1 answer
  • In the context of the Oracle Enterprise Manager, a(n) _____ is a named collection of database access privileges that authorize a
    13·1 answer
  • Preferred stock which confers rights to prior periods' unpaid dividends even if they were not declared is called:
    13·1 answer
  • You notice that the price of Blu-ray players falls and the quantity of Blu-ray players sold increases. You suspect that _____ Bl
    10·1 answer
  • Donna runs an inn and charges $300 a night for a room, which equals her cost. Sam, Harry, and Bill are three potential customers
    5·1 answer
  • After a robbery,why should you move away from ant place the robber has touched
    5·1 answer
  • Which customer behavior has motivated retailers to reduce the amount of stock kept on hand, rent or lease smaller spaces, and ra
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!