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Iteru [2.4K]
3 years ago
6

A corporate bond has a face value of $1,000 and a coupon rate of 9.5%. The bond matures in 12 years and has a current market pri

ce of $1,100. If the corporation sells more bonds it will incur flotation costs of $48 per bond. If the corporate tax rate is 35%, what is the after-tax cost of debt capital
Business
1 answer:
joja [24]3 years ago
6 0

Answer:

5.71%

Explanation:

The after tax cost of debt=pretax cost of debt*(1-t)

where t is the tax rate of 35% or 0.35

pretax cost of debt=yield to maturity

The yield to maturity can be determined using rate formula in excel as below:

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

nper is the number of coupon interest payable by the bonds i.e 12 coupons in 12 years

pmt is the annual coupon=$1000*9.5%=$95

pv is the current market price-flotation cost=$1,100-$48=$1052

fv is the face value of $1000

=rate(12,95,-1052,1000)=8.78%

After tax cost of debt=8.78% *(1-0.35)=5.71%

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sesenic [268]

Answer:

A web streaming company fulfills a 12-month service term paid by customers in advance.

Explanation:

Revenue is recognized from services rendered or goods delivered. It is recognized only when the risk and reward is transferred, further it relates to the normal business of company.

As in the first sentence the company makes scientific devices and it sales an agricultural land, that is sale of fixed asset.

In second case the pharmaceutical company receives donation which is anonymous.

All the things are not revenue for company.

It is only the web streaming company which shall recognize revenue as the services are rendered and revenue shall be recognized related to normal business of company.

8 0
3 years ago
For banks, online transactions are an inexpensive alternative to branch banking. Transaction costs are about ________ per online
MaRussiya [10]

Answer:

The corrects answers that fills the gaps are: 2 cents; $1,07.

Explanation:

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Among the main electronic means of payment can be mentioned: debit cards, credit cards, mobile wallet and internet transactions - electronic banking.

The advantages:

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- They can be used to make purchases online.

- In some cases, they help build a credit history.

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4 0
3 years ago
. Which of the following individuals commonly use finance in the course of their job?I. Chief financial officersII. AccountantsI
sergiy2304 [10]

Answer:

E. I, II, III, and IV

Explanation:

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3 years ago
In the exact moment you run out of laundry detergent and realize you need to pick some up at the store, you are in the ________
shutvik [7]
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3 years ago
Tom Cruise Lines Inc. issued bonds five years ago at $1,000 per bond. These bonds had a 25-year life when issued and the annual
Dmitrij [34]

<u>Solution and Explanation:</u>

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