Maple Industries has 7 percent bonds outstanding that mature in thirteen years. The bonds pay interest semiannually and have a f
ace value of $1,000. Currently, the bonds are selling for $1,021.16. What is the firm's pre-tax cost of debt?A. 6.75%
B. 6.84%
C. 6.91%
D. 7.03%
E. 7.14%
B. 6.84%
C. 6.91%
D. 7.03%
E. 7.14%
1 answer:
Answer:
A. 6.75%
Explanation:
In this question, we use the Rate formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
Present value = $1,021.16
Future value or Face value = $1,000
PMT = 1,000 × 7% ÷ 2 = $35
NPER = 13 years × 2 = 26 years
The formula is shown below:
= Rate(NPER,PMT,-PV,FV,type)
The present value come in negative
So, after solving this, the pretax cost of debt is 6.75% (3.38% × 2)
You might be interested in
Answer:
The bid amount should be $13,200,264.
Explanation:
An oil and gas producing company owns 42,000 acres of land in a southeastern state.
It operates 630 wells which produce 18,000 barrels of oil per year and 1.7 million cubic feet of natural gas per year.
The revenue from the oil is $1,800,000 per year and for natural gas the annual revenue is $581,000 per year.
Total Annual Revenue
= Revenue from oil + Revenue from gas
= $1,800,000 + $581,000
= $2,381,000
The bid amount should be the present worth of total annual revenue.
Present Worth of total annual revenue
=
=
=
=
=
=
= $13,200,264