1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Nonamiya [84]
3 years ago
14

Garnet Corporation is considering issuing risk-free debt, or risk-free preferred stock. The tax rate on interest income is 35%,

and the tax rate on dividends or capital gains from preferred stock is 15%. However, the dividends on preferred stock are not deductible for corporate tax purposes, and the corporate tax rate is 40%.
a. If the risk-free interest rate for debt is 6%, what is cost of capital for risk-free preferred stock?
b. What is the after-tax debt cost of capital for the firm? Which security is cheaper for the firm?
c. Show that the after-tax debt cost of capital is equal to the preferred stock cost of capital multiplied by (1 −τ*).
Business
1 answer:
adell [148]3 years ago
4 0

Answer:

Explanation:

a) investors wil receive 6% x ( 1-0.35)

= 3.9% risk free debt  after tax.

After  tax  return from risk free  preferred stock earnings must be equal.

to evaluate the cost of capital  fro preferred stock = 3.9%/(1-0.15)

                                                                                    = 4.59%

b) the after-tax debt cost of capital = 6% x (1- 0.40)

= 3.60%.

therefore, 3.60% is cheaper than the 4.59% preffered stoch cost per capital

c)  r* = 1 - [{(1 - 0.40)(1 - 0.15)} / (1 - 0.35)] = 1 - 0.7846 = 0.2154, or 21.54%

Hence, 4.59% x (1 - 0.2154) = 3.60%

You might be interested in
Charlie wants to register a name for his company. He wants a name that is specific to the company and makes the company easily i
sweet-ann [11.9K]

Answer:

The name of the company isLaunch Business As

6 0
2 years ago
Read 2 more answers
How do stocks and bonds differ?
SIZIF [17.4K]

Answer:

The most suitable answer is Stocks may help you protect your money from inflation while bonds may be more susceptible to losing their value over time due to inflation.

Explanation:

Now remember, this is not "guaranteed" as stocks come with higher risks comparing to bonds, yet in US share market, stocks have performed well than the bonds overall. This is because stock prices fluctuate and if the company invested in is performing well, the share prices can sky rocket over a long period while in bonds you don't see this often as they are issued for a specific time and represents the debt capital.

6 0
3 years ago
You find some public records about customer satisfaction in the company's archive. What type of data is this called?
Iteru [2.4K]

The  type of data is this called raw data when You find some public records about customer satisfaction in the company's archive.

Raw data collection is typically not ready for analysis, but when organized and cleaned, it becomes data. Processed data is the type of data that has been processed from raw data.

The term raw data is most commonly used to refer to information collected for research studies before the information is transformed or analyzed in any way. This term may apply to data that has been collected or cleaned once but has not been further transformed or analyzed.

A list of all purchases made at the store during the month, but without further structure or analysis. A video captured every second by a surveillance camera at night. The performance of all his students in the district for one quarter. List of all movies streamed by video streaming companies.

Learn more about  public records at

brainly.com/question/27583809

#SPJ4

8 0
2 years ago
On December 31, 20X4, Alan and Dave are partners with capital balances of $80,000 and $40,000, and they share profit and losses
lawyer [7]

Answer:

$24,000

Explanation:

For computing the implied goodwill, first, we have to calculate the total partners capital and total firm capital

Total partners capital = $80,000 + $40,000 + $36,000

                                    = $156,000

Now the total firm capital would be

= $36,000 ÷ 20%

= $180,000

Now the implied goodwill would be

= $180,000 - $156,000

= $24,000

3 0
3 years ago
Marcos wants to buy Lucia's land, but she refuses to sell. Marcos begins using subpoenas, court orders, and other formal legal p
Xelga [282]

<u>Full question:</u>

Marcos wants to buy Lucia’s land, but she refuses to sell. Marcos begins using subpoenas, court orders, and other formal legal procedures in an unrelenting effort to force Lucia to sell. This is

abuse of process.

not a tort.

appropriation.

wrongful interference with a contractual relationship.

<u>Answer:</u>

This is   abuse of process

<u>Explanation:</u>

Abuse of process assigns to the inappropriate handling of a civil or criminal justice system for an unintended, wicked, or malicious reason. It is the hateful and intentional abuse of frequently published civil or criminal court means that is not supported by the underlying legal action.

Abuse of process covers prosecution claims in defective faith that is expected to hold the commitment of justice. Abuse of process is a deliberate tort. Abuse of process comprises the complete range of modes conflict to the prosecution process such as hearing proceedings, the noticing of allegations and the issuing of subpoenas.

4 0
3 years ago
Other questions:
  • SCC Co. reported the following for the current year:
    14·1 answer
  • The cost principle is the basis for entering the purchase price into the accounting records.a. Trueb. False
    10·1 answer
  • Working for a nonprofit company that lacks financial resources or working for a start-up company that lacks the infrastructure a
    5·1 answer
  • When a corporation sells all or substantially all of its assets to another corporation, generally,
    9·1 answer
  • You purchase Rayovac batteries from Wal-Mart. You send in your battery receipt and a form with your name, address, and UPC code
    5·1 answer
  • Your sister turned 35 today, and she is planning to save $20,000 per year for retirement, with the first deposit to be made one
    7·1 answer
  • Which of the following might be requested on a typical job application?
    9·2 answers
  • A _____ gives you a chance to express your appreciation to the interviewer for his or her time and interest.
    15·1 answer
  • Một người tiêu dùng có thu nhập I = 10.000 ngàn đồng/tháng để mua 2 hàng hóa X và Y. Giá của hàng hóa X là Px = 20 ngàn đồng/kg
    8·1 answer
  • As the team works together, Carol plays a diversity manager role , diffusing conflicts and helping everyone feel welcome to cont
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!