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Telecom Systems can issue debt yielding 5 percent. The company is in a 30 percent bracket. What is its aftertax cost of debt?

Alla [95]

Answer:

after-tax cost odf debt 0.035 = 3.5%

Explanation:

the debt provides a tax shield for companies, as the interest expense, decrease the net income. Interest decrease income and therefore, the tax income associate with the income.

So the cost of debt with taxes is lower, because it lower the income tax expense

<u>the formula will be:</u>

cost of debt ( 1 - tax-rate)

0.05 ( 1 - 0.3) = 0.05 x 0.7 = 0.035

3 0

3 years ago

Nash Corporation owns machinery that cost $24,400 when purchased on July 1, 2017. Depreciation has been recorded at a rate of $2

torisob [31]

Answer:

(a)

Depreciation Expense (Debit): 1,952

Accumulated Depreciation-Machinery (Credit): 1,952

(b)

Cash (Debit): 36,330

Accumulated Depreciation-Machinery (Debit): 12,200

Machinery (Credit): 24,400

Gain of Machinery (Credit): 24,130

Explanation:

A)

Because (10,248 / 2928 = 3.5), we deduce that the depreciation is per month, So:

Depreciation Expense = 2,928 / 12 * 8 = 1,952

B)

Gain of Machinery = Cash - Net Book Value

Gain of Machinery = Cash - (Machinery Cost - Accumulated Depreciation-Machinery)

Gain of Machinery = Cash - Machinery Cost + Accumulated Depreciation-Machinery

Gain of Machinery = 36,330 - 24,000 + 12.000

Gain of Machinery = 24,130

8 0

3 years ago

If an offer was made on a house in which the buyer intended to have a hair salon in the basement, but found out a few days prior

Lerok [7]

Answer:

Yes, but only if they terminate in writing prior to the Record Title Objection Deadline

Explanation:

Zoning is a matter of Title. Buyers have the right to terminate the contact without penalty if any aspect of Title is unsatisfactory to them. However, they must due so in writing prior to either the Off-Record Title Objection Deadline or the Record Title Objection Deadline.

3 0

3 years ago

Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fi

Dovator [93]

Answer:

A.Economic Ordering Quantity =600 units

B.Number of orders= 105 orders

C.Average inventory units=300 units

D.Total cost = $840

Explanation:

A. Computation for the economic ordering quantity

Using this formula

EOQ =Sqare root of (2×Annual demand×Ordering cost) /Holding or carrying costs

Where,

Annual demand = 63 000 units

Ordering cost =$4

H = Holding or carrying costs = $1.40

Let plug in the formula

Economic Ordering Quantity =Sqare root of 2×63,000×4/1.4

Economic Ordering Quantity= Square root of 504,000/1.40

EOQ=Square root of 360,000

Economic Ordering Quantity=600 units

b. Computation of how many orders will be placed during the year.

Using this formula

Number of orders = Sales units / EOQ

Let plug in the formula

Number of orders= 63,000 / 600

Number of orders= 105 orders

c. Computation of what the average inventory be

Using this formula

Average inventory units = EOQ / 2

Let plug in the formula

Average inventory units= 600 / 2

Average inventory units=300 units

d. Computation for the total cost of ordering and carrying inventory

First step is to find the Ordering cost

Using this formula

Ordering costs = Number of orders × Cost per order

Let plug in the formula

Ordering costs= 105 × $4 = $420

Second step is to find the Carrying cost

Using this formula

Carrying costs = Average inventory × Carrying cost per unit

Let plug in the formula

Carrying costs = 300× $1.40

Carrying costs =420

Now Let find the Total cost

Using this formula

Total cost = Ordering costs + Carrying costs

Let plug in the formula

Total cost= $420 + 420

Total cost = $840

Therefore in a situation where a firm decide to place an orders based on the EOQ, this means the ordering costs will equal the carrying costs.

6 0

4 years ago

Ebenezer is the CEO of a successful small business and would like to double the size of their current loan with First National B

irakobra [83]

Answer:

Following are the factors a bank manager must cosider before approving the loan for any client in order to avoid prospective or future NPA's (Non Performing Assets)-

CREDIT HISTORY

Banks manager should always prefer people with clean financial habits. A credit score tells a lot about your financial health. Whether you pay your EMIs on time or default can be easily checked through your credit report, which is maintained by different bureaus. Bank manager should consider whether Ebenezer is paying the installments of first $500000 loan in timely manner.

OCCUPATION

There are some occupations that banks prefer. For example, in many government banks, government and PSU employees are most preferred as they have a stable job. After government employees, banks prefer people working with blue-chip companies and doctors. Further down the line come chartered accountants, engineers and lawyers. People working in private companies and self-employed get the lowest scores. Occupation is one of the important factors taken into consideration while appraising a loan. It is important because repayment capacity depends on the income of the person.

AGE

Age is another criterion that banks look at before giving a loan. To give you an idea, people in the age group of 30-50 years are most preferred as they are considered more financially stable. They also have a decent number of working years left to repay their loans. On the other hand, people above 60 fare the worst in the internal scoring model of banks.

REPAYMENT PERIOD

The shorter the repayment period, the more your bank likes you. For example, several banks give maximum score to people who opt for a repayment period of up to five years. It falls to half if the repayment period is between 10 and 15 years. And it is at the lowest end for those opt for a payment period of 15-20 years. So, the next time, try to shorten your loan period if approval becomes difficult.

RELATIONSHIP WITH THE BANK

The older your relationship with the bank, the higher are your chances of getting the loan approved. Banks value their old customers due to familiarity with the financial past. A person who has been with a bank for more than 10 years is definitely preferred over the one with no previous relationship with the bank.

PURPOSE OF THE LOAN

If the loan application filed by the applicant relates to expansion of business. The bank manager must consider the trend of sales and earning i.e. whether the business has potential to grow after the injuction of further capital. In other words manager should consider whether the sales and earnings has increased over the last three years.

SURPLUS INCOME

Bank Manager should consider whether the balance sheet of applicant is having surplus of profits in the form of retained earnings or reserves. In other words manager should consider whether the business has been successful in the past.

At last to conclude the bank manager should only approve the loan after critically analyze the above factors. Over and above manager should decline the offer of $1000 in any case as it tentamounts to bribe for approving loan which is ethically and legally not acceptable.

4 0

4 years ago