Answer:
after-tax cost of debt 5.2725%
Explanation:
We will solve for the market rate of the bonds which is the one that makes the maturity and coupon payment equal to its current market price:
We sovle it using a financial calcualtor or excel goal seek tool
C 110.000 (1,000 x 11%)
time 10 years
<em>rate 0.070304812</em>
PV $771.5066
Maturity 1,000
time 10 years
<em> rate 0.070304812</em>
PV 506.90
PV c $771.5066
PV m $506.9034
Total $1,278.4100
Now that we find that market rate is 7.03%
we calcautle the after tax cost of debt:
7.03 x (1 - 25%) = 5.2725%
Answer:<u> </u><u><em>Relevant cost of new preferred stock = 10.53%</em></u>
Explanation:
Given:
Dividend = $4.00 per share
Selling for = $40 per share.
Flotation costs = 5% of the selling price.
Marginal tax rate is 30%.
We can compute the cost of new preferred stocks using the following formula:
∴ Relevant cost of new preferred stock = 10.53%
Therefore, the correct option is (d)
Answer:
a) $101354
Explanation:
To calculate the future balance of the interest-earning account use following formula
FV = PV x ( 1 + r )^n
Where
FV = Future value = Balance of Interest-earning account after 3 years = ?
PV = present value = Amounr deposited in the account = $90,000
r = Periodic interest rate = 4% x 6/12 = 2%
n = Numbers of periods = Numbers of years x Compounding periods per year = 3 years x 2 periods per year = 6 periods
Placing values in the formula
FV = $90,000 x ( 1 + 2% )^6
FV = $101,354