Answer:
a. 0.75% per month
b. 2.25% per quarter
c. 4.5% semi- annually
d. 9% yearly
Explanation:
a. Computing the effective interest rate per payment period for the payment schedule which is monthly:
Effective rate (monthly) = Nominal rate (r) / Compounded monthly (m)
where
r is 9%
m is 12
Putting the values above:
= 9% / 12
= 0.75% per month
b. Computing the effective interest rate per payment period for the payment schedule which is quarterly:
Effective rate (quarterly) = Nominal rate (r) / Compounded quarterly (m)
where
r is 9%
m is 4
Putting the values above:
= 9% / 4
= 2.25% per quarter
c. Computing the effective interest rate per payment period for the payment schedule which is semi- annually:
Effective rate (semi- annually) = Nominal rate (r) / Compounded quarterly (m)
where
r is 9%
m is 2 (every 6 months)
Putting the values above:
= 9% / 2
= 4.5% semi- annually
d. Computing the effective interest rate per payment period for the payment schedule which is annually:
Effective rate (annually) = Nominal rate (r) / Compounded yearly (m)
where
r is 9%
m is 1 (end of the year)
Putting the values above:
= 9% / 1
= 9% yearly
Answer:
New Credit Corporation.
Explanation:
A contract can be defined as an agreement between two or more parties (group of people) which gives rise to a mutual legal obligation or enforceable by law.
Also, mutual assent is a legal term which represents an agreement by both parties to a contract. When two parties to a contract both have an understanding of the parameters, terms and conditions surrounding a contract, it ultimately implies that they are in agreement; this is generally referred to as mutual assent.
In this scenario, Lyle and Miranda agree that Lyle will fix the refrigeration unit in Miranda's Bagel Café in exchange for her payment of a debt that Lyle owes to New Credit Corporation. Under this contract, the intended beneficiary is New Credit Corporation as agreed upon by Lyle and Miranda.
An intended beneficiary can be defined as a third-party deemed to be the recipient of an action with respect to the execution of a contract.
Answer:
Invest at a minimum of 7.5% annual simple interest
Explanation:
Given the goal of purchasing a boat that will cost $30,000 in 20 years, David needs to earn an interest computed below on his investment in the savings account.
Interest required = 30,000 - 12,000
= 18,000
Therefore the minimum rate of interest that will achieve this goal,
= Principal * rate * time = target amount
= 12,000 * R * 20 years = 18,000
= R = 18,000/(12,000*20) = 0.075 = 7.5%.
In addition, David could also continue his saving from his teaching job. This will reduce the minimum investment return required to achieve the goal.
Answer:
$277,125
Explanation:
The calculation of income tax expense is shown below:-
Income tax expense = Income taxes payable at the end of 2022 + (Rent revenue ÷ 2) × Tax rate
= $258,000 + (($153,000 ÷ 2) × 0.25)
= $258,000 + $76,500 × 0.25
= $258,000 + $19,125
= $277,125
Therefore for computing the income tax revenue we simply applied the above formula.
Answer:
a)
Cost of debt (after tax) = 5.4%
Cost of preferred stock (
) = 10.53%
Cost of common stock (
) = 16.18%
b)
WACC = 14%
c)
project 1 and project 2
Explanation:
Given that:
Debt rate (
) = 9% = 0.09
Tax rate (T) = 40% = 0.4
Dividend per share (
) = $6
Price per share (
) = $57
Common stock price (
)= $39
Expected dividend (
) = $4.75
Growth rate (g) = 4% = 0.04
The target capital structure consists of 75% common stock (
), 15% debt (
), and 10% preferred stock (
)
a)
Cost of debt (after tax) =`
Cost of debt (after tax) = 5.4%
Cost of preferred stock () = 
= 10.53%
= 10.53%
Cost of common stock () = 
= 16.18%
b)
WACC = 14%
c) Only projects with expected returns that exceed WACC will be accepted. Therefore only project 1 and project 2 would be accepted
