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boyakko [2]
3 years ago
15

Calculate the after-tax cost of debt using following bond information. A four year bond has a 7 percent coupon rate and a $1000

face value. If the market value of the bond is $788, assuming that the bond makes annual coupon payments and the tax rate is 35%.
a. 7.16 %
b. 14.32 %
c. 12.12 %
d. 9.31 %
e. 5.01 %
Business
1 answer:
miv72 [106K]3 years ago
3 0

Answer:

d. 9.31 %

Explanation:

in order to solve this question you cannot use the approximate yield to maturity since it will yield an approximation, but not an exact answer:

approximate YTM = {70 + [(1,000 - 788)/4]} / [(1,000 - 788)/2] = 13.76%

after tax cost of debt = 13.76% x 0.65 = 8.94%, but that is not an option

we must determine the exact yield to maturity which is determined by the following formula:

$788 = $70/(1 + i) + $70/(1 + i)² + $70/(1 + i)³ + $1,070/(1 + i)⁴

the simplest way to solve this is by using a financial calculator since the math is complicated. The exact yield to maturity = 14.324%

after tax cost of debt = 14.324% x (1 - tax rate) = 14.324% x 0.65 = 9.31%

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Answer:

Instructions are below.

Explanation:

Giving the following information:

Machine-hours required to support estimated production 155,000

Fixed manufacturing overhead cost $ 653,000

Variable manufacturing overhead cost per machine hour $ 4.70

<u>First, we need to calculate the predetermined overhead rate.</u>

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= (653,000/155,000) + 4.7

Predetermined manufacturing overhead rate= $8.91 per machine hour

Job 400:

Direct materials $ 390

Direct labor cost $ 220

Machine-hours used 37

<u>T</u><u>o allocate overhead, we need to use the following formula:</u>

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 8.91*37= $329.67

<u>Now, we can calculate the total cost and unitary cost:</u>

Total cost= 390 + 220 + 329.67= 939.67

Unitary cost= 939.67/60= $15.66

<u>Finally, the selling price for Job 400:</u>

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10 reasons why kids should have phones Use your own words Explain your reasons
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Explanation:

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Answer:

B

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4 0
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Sales at a fast-food restaurant average $6,000 per day. The restaurant decided to introduce an advertising campaign to increase
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Yes

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Adams Industries holds 42,000 shares of FedEx common stock, which is not a large enough ownership interest to allow Adams to exe
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Answer:

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Explanation:

given data

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to find out

what amount will it be reported in the 2019 balance sheet

solution

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and here

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and

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