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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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Arisa [49]

Answer:

100,000

Explanation:

Given that

Approximately frauds = $10 million

Profit margin = 10%

And the sale value of the product per unit = $1,000

So by considering the above information, the additional units is

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8 0
3 years ago
Borrowed 152300 for three years if the qouted rate (apr) is 11.75% and the compounding is daily what is the effective annual rat
Vikki [24]

Answer:

The appropriate response is "12.47%".

Explanation:

The given values are:

Borrowed amount,

= 152300

APR,

= 11.75%

i.e.,

= 0.1175

Now,

The effective annual rate will be:

= (\frac{1+APR}{n} )^n

On substituting the given values, we get

= (\frac{1+0.1175}{365} )^{365}

= (\frac{1.1175}{365} )^{365}

= 1.12466-1

= 0.1247 \ or \ 12.47 \ percent

7 0
3 years ago
At December 31, 20X3, before recognizing any depreciation expense for 20X3, X Company has a machine with an original cost of $36
shutvik [7]

Answer:

If X Company uses the units of production method for calculating depreciation, depreciation expense in 20X3 will be (rounded):

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Usefull life         7  

   

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Deprec=cost/unit    

   

Depre=360000/80000    

Depre= 4,5  

   

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3 years ago
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PtichkaEL [24]

Strategy is a sustainable and dominant market share the set of actions a firm takes to achieve a competitive advantage.

<h3>What is Competitive advantage strategy?</h3>

Competitive advantage can be explained as  factors that influence a company to produce goods or services and be able to stand out compare to her other company in that industry.

These advantages help the company to be able to produce and generate more sales  compared to its market rivals.

Learn more about competitive advantage at:

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5 0
2 years ago
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BARSIC [14]

Answer:

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3 0
3 years ago
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