When are winner-take-all markets good for consumers?

Kenny Electric Company's noncallable bonds were issued several years ago and now have 20 years to maturity. These bonds have a 9

murzikaleks [220]

Answer:

d. 5.08%

Explanation:

We have to first calculate the YTM of the bond, and then apply the tax shield.

To get the YTM we have to calculate the rate of return of an annuity of 46.25 for 20 years compounding semiannually at IRR rate and the present value of the face value redeem in 20 years.

$C \times \frac{1-(1+r)^{-time} }{rate} +Face\:Value/(1+rate)^{time}= PV\\$

$46.25 \times \frac{1-(1+IRR/2)^{-20*2} }{rate} + 1000/(1+IRR)^{20}= 1075\\$

IRR = 0.084656891 (it should be done using financial calculator or excel or a similar software program)

then we apply the shield tax to the IRR:

IRR x (1 - tax-rate) = Cost of debt

0.084656891 * ( 1 - 0.4) = 5.0794= 5.08

3 0

3 years ago

Both Bond Sam and Bond Dave have 7.3 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three

Zarrin [17]

Answer:

Sam change: -5.13%

Dave change -18.01%

Explanation:

If interest rate increase by 2%

then the YTM of the bond will be 9.3%

We need eto calcualte the present value of the coupon and maturity of the bond at this new rate:

For the coupon payment we use the formula for ordinary annuity

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

Coupon payment: 1,000 x 7.3% / 2 payment per year: 36.50

time 6 (3 years x 2 payment per year)

YTM seiannual: 0.0465 (9.3% annual /2 = 4.65% semiannual)

$36.5 \times \frac{1-(1+0.0465)^{-6} }{0.0465} = PV\\$

PV $187.3546

For the maturity we calculate usign the lump sum formula:

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity: $ 1,000.00

time: 6 payment

rate: 0.0465

$\frac{1000}{(1 + 0.0465)^{6} } = PV$

PV 761.32

Now, we add both together:

PV coupon $187.3546 + PV maturity $761.3154 = $948.6700

now we calcualte the change in percentage:

948.67/1,000 - 1 = -0.051330026 = -5.13

For Dave we do the same:

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

C 36.50

time 40

rate 0.0465

$36.5 \times \frac{1-(1+0.0465)^{-40} }{0.0465} = PV\\$

PV $657.5166

$\frac{Maturity}{(1 + rate)^{time} } = PV$

Maturity 1,000.00

time 40.00

rate 0.0465

$\frac{1000}{(1 + 0.0465)^{40} } = PV$

PV 162.34

PV c $657.5166

PV m $162.3419

Total $819.8585

Change:

819.86 / 1,000 - 1 = -0.180141521 = -18.01%

6 0

3 years ago

Which education level has the highest return on investment (ROI)? ABachelor's Degree (4 years of college) BROI is equal for all

Bad White [126]

A. A Bachelor's Degree This has the highest rate of investment because with the other options like a high school diploma, the person who gets such certificate can only earn minimum wage. However, with a 4 years Bachelor's degree the person can earn more and will live according to certain societal standards.

8 0

4 years ago

Schwiesow Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 7.05 Direct labor

patriot [66]

Answer:

The contribution margin per unit is $5.1

Explanation:

The contribution margin per unit is the amount from selling price per unit after deducting all the related variable costs per unit. This is the amount that each product contributes towards covering the fixed costs.

Contribution margin per unit:

Selling price per unit 18.7

Less : Variable cost per unit

Direct material (7.05)

Direct labor (3.5)

Variable manufacturing Overhead (1.65)

Sales commission (1.00)

Variable Admin expense (0.40)

Contribution margin per unit 5.1

3 0

3 years ago

Gault Corporation had the following shares of stock outstanding on December 31, 2018:

Andreas93 [3]

Answer:

The total amounts payable to preferred stockholders and common stockholders, respectively, are: $480,000 and $320,000.

Explanation:

Cumulative preferred stock has the dominant right over common stocks in term of receiving cash dividend.

The dividend paid to preferred stock per year is: 100 x 20,000 x 8% = $160,000 and the company owed investor 03 years of dividend ( 2016,2017,2018) with the dividend payable amounted to 160,000 x 3 = $480,000.

The dividend paid to common stock is the left over, after paying to preferred stock holders, which is calculated as $800,000 - $480,000 = $320,000.

So, The total amounts payable to preferred stockholders and common stockholders, respectively, are: $480,000 and $320,000.

5 0

3 years ago