In order for a higher-cost alternative to be attractive, the incremental rate of return must be_________________

Bond valuation [LO14-2] Your investment department has researched possible investments in corporate debt securities. Among the a

Sonbull [250]

Answer:

Bond Valuation

Other things being equal, the bond issue that offers the most attractive investment opportunity if it can be purchased at the prices stated is:

= BB Corp. bonds.

Explanation:

a) Data and Calculations:

Maturity period = 20 years

Issue date = January 1, 2021

Maturity date = December 31, 2040

Company Bond Price Stated Rate Annual Interest FV

1. BB Corp. $ 107 million 15 % $15 million $3,518,371,301.23

2. DD Corp. $ 100 million 14 % $14 million 2,827,106,832.58

3. GG Corp. $ 93 million 13 % $13 million 2,260,756,079.53

From an online financial calculator, the future values of the bonds are:

N (# of periods) 20

I/Y (Interest per year) 15

PV (Present Value) 107000000

PMT (Periodic Payment) 15000000

Results

FV = $3,518,371,301.23

Sum of all periodic payments $300,000,000.00

Total Interest $3,111,371,301.2

N (# of periods) 20

I/Y (Interest per year) 14

PV (Present Value) 100000000

PMT (Periodic Payment) 14000000

Results

FV = $2,827,106,832.58

Sum of all periodic payments $280,000,000.00

Total Interest $2,447,106,832.58

N (# of periods) 20

I/Y (Interest per year) 13

PV (Present Value) 93000000

PMT (Periodic Payment) 13000000

Results

FV = $2,260,756,079.53

Sum of all periodic payments $260,000,000.00

Total Interest $1,907,756,079.53

8 0

3 years ago

According to the supply and demand model, when the cotton gin was invented and if all else was held constant, we would expect th

larisa [96]

Answer:

decrease; increase

Explanation:

Because of the invention of the new technology which is the invention of the cotton gin, the production of the cotton boomed. This also means that the production of the cotton rise which as a result, would make the supplies higher and due to higher supplies, there would be reduction in the price of the cotton. Since, mentioned all factors remain constant which means demand remain constant, so

The equilibrium price of the cotton would be expected to decrease and the equilibrium quantity of cotton would be expected to increase.

4 0

4 years ago

The Wilmer Group (WG) provides tax advice to multinational firms. WG charges clients for

Volgvan

Answer:

NUMBER 1

(A) For San Antonio Dominion,

Total Bill = $17,264

(B) For Amsterdam Enterprises,

Total Bill = $8,112

NUMBER 2

(A) San Antonio Dominion - $16,305

(B) Amsterdam Enterprises - $9,265

NUMBER 3

How to determine the more appropriate S.S. allocation base, between

- Professional Labour Cost

- Professional Labour Hours

The more appropriate allocation base will consider both

- Profit made by WG

- Allocation Base that will keep both clients (or the most clients).

NUMBER 4

Determine the formula needed to calculate the total cost per professional for each client when WG allocates support costs at 30% of direct professional costs.

This is simply the formula used in Requirement 1. Total Cost per professional per client, for Requirement 1 is:

(Hourly rate/cost for Mark Wilmer × Number of hours spent on each client) + (Hourly rate for Ashley Bennet × number of hours spent on each client) + (Hourly rate for John Amesbury × number of hours spent on each client) + 30% of the above sum.

EXPLANATION:

NUMBER 1

(A) SAN ANTONIO DOMINION

Direct Professional Time Cost:

(21×500) + (4×170) + (30×70) = 10,500 + 680 + 2100 = $13,280

Support Services:

30/100 × 13,280 = $3,984

Total Bill:

13,280 + 3,984 = $17,264

(B) AMSTERDAM ENTERPRISES

Direct Professional Time Cost:

(3×500) + (11×170) + (41×70) = 1500 + 1870 + 2870 = $6,240

Support Services:

30/100 × 6,240 = $1,872

Total Bill:

6240 + 1872 = $8,112

NUMBER 2

(A) SAN ANTONIO DOMINION

Support Services:

$55/hour × 55hours = $3,025

Total Bill:

13,280 + 3,025 = $16,305

(B) AMSTERDAM ENTERPRISES

Support Services:

$55/hour × 55hours = $3,025

Total Bill:

6,240 + 3,025 = $9,265

NUMBER 3

Looking at the SS (Support Services) formula that fetches more profit for WG,

Requirement 1

Total profit: 17,264 + 8,112 = $25,376

Requirement 2

Total profit: 16,305 + 9,265 = $25,570

Formula 2 earns WG more profit but since the difference in not much, WG can retain formula 1, in order to help Amsterdam Enterprises.

KUDOS!

7 0

3 years ago

Trudy inc had the following bank reconciliation at march 31 2013 all reconciling items at march 31 2013 cleared the bank in apri

djverab [1.8K]

Answer:

The cash balance per books at April 31, 2013 is $28,200.

Explanation:

It is required to compute the Balance per bank on 30, April:

Balance per bank on 30 April = Balance per bank statement + Deposits - Disbursement

= $37,200 + $46,700 - $49,700

= $83,900 - $49,700

= $34,200

The Cash balance per books on April 30, 2013 is computed as:

Cash balance per books on April 30, 2013 = Balance per bank on 30 April - Cleared the outstanding checks

= $34,200 - $6,000

= $28,200.

7 0

4 years ago

Which of the following statements is false? Common-size balance sheets allow for comparison of firms with different levels of to

larisa [96]

Answer:

Each item on a common-size balance sheet is expressed as a percentage of sales.

Explanation:

In a Common-size balance sheet, the items of the financial statements are presented i.e assets, liabilities and the stockholder equity are reflected in a percentage of the total assets and the total liabilities & owners equity as the case may be.

Like on numerator side the asset item is there and on the denominator side the total assets are there

3 0

3 years ago

In order for a higher-cost alternative to be attractive, the incremental rate of return must be__________________.