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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%

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Marta_Voda [28]

Answer:

[D] give written notice to the issuer of the securities of the BD's policy regarding private securities transactions.

Explanation:

The registered representative is obligated to give written notice of the BD employing the RR, receive approval from the BD employing the RR, and record the transactions on the books of the BD if the RR receives a commission. However, the registered representative is not expected to notify the issuer of the securities for private securities transactions.

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2 years ago
What are the steps for the software engineering institute model for risk management?
Dahasolnce [82]

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A

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What a primary cause of inflation​
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Excess aggregate demand (AD)

Quick economic growth.

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3 years ago
A credit card company wants your business. If you accept their offer and use their​ card, they will deposit 11​% of your monetar
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Answer:

I will have $183536835400 in my savings after 1515 years

Explanation:

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3 0
3 years ago
Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production fa
Anna007 [38]

Answer:

Given,

Annual demand, D = 12500,

Setting up cost, S = $ 49,

Production rate per year, P =  production facility × capability of production = 300 × 105 = 31500,

Holding cost per year, H = $ 0.15,

Hence,

(i) Optimal size of the production run,

Q = \sqrt{\frac{2DS}{H(1-\frac{D}{P})}}=\sqrt{\frac{2\times 12500\times 49}{0.15(1-\frac{12500}{31500})}}=3679.60238126\approx 3680

(ii) Average holding cost per year,

=\frac{QH}{2}(1-\frac{D}{P})

=\frac{3680\times 0.15}{2}(1-\frac{12500}{31500})

=166.476190476

\approx \$ 166.48

(iii) Average setup cost per year,

=\frac{D}{Q}\times S

=\frac{12500}{3680}\times 49

=166.44021739

\approx \$ 166.44

(iv) Total cost per year = average setup cost per year + average holding cost per year + cost to purchase 12500 lights

= 166.44 + 166.48 + 12500(0.95)

= $ 12207.92

7 0
3 years ago
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