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never [62]
3 years ago
15

Baxter Co. wants to issue new 20-year bonds for some much-needed expansion projects. The company currently has 5.6 percent coupo

n bonds on the market that sell for $1,094.30,page 160 make semiannual payments, and mature in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell at par
Business
1 answer:
miv72 [106K]3 years ago
4 0

Answer:

The coupon rate the company should set on its new bonds if it wants them to sell at par is 4.86%.

Explanation:

The coupon rate can be determined by calculating the yield to maturity (YTM) using the following RATE function in Excel:

YTM = RATE(nper,pmt,-pv,fv) * Number of semiannuals in a year = RATE(nper,pmt,-pv,fv)*2 .............(1)

Where;

YTM = yield to maturity = ?

nper = number of periods = number of years to maturity * number of semiannuals in a year = 20 * 2 = 40

pmt = semiannual coupon payment = face value * (annual coupon rate / number of semiannuals in a year) = 1000 * (5.6% / 2) = 28

pv = present value = current bond price = $1,094.30 = 1094.30

fv = face value of the bond = 1000

Substituting the values into equation (1), we have:

YTM = RATE(40,28,-1094.30,1000)*2

Inputting =RATE(40,28,-1094.30,1000)*2 into excel (Note: as done in the attached excel file), we have

YTM = 4.86%

Therefore, the coupon rate the company should set on its new bonds if it wants them to sell at par is 4.86%.

Download xlsx
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Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one uni
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Answer:

1. Material Variances

Material Price Variance = $3,000 F

Material Quantity Variance = $4,000 U

2. Labor Variances

Labor Rate Variance = $1,425 U

Labor Efficiency Variance = $900 F

Explanation:

Provided information we have,

Direct Materials

Standard Quantity = 4.6 pounds

Standard Rate = $2.50 per pound

Direct Labor

Standard Hours = 0.2 hour per unit

Standard Rate = $18 per hour

Actual Materials

Actual Quantity = 20,000 pounds

Actual Rate = $2.35 per pound

Actual Labor

Labor Hours = 750 hours

Labor Cost = $14,925

Labor rate = \frac{14,925}{750} = $19.9 per hour

Actual Units produced = 4,000

1. Material Variances

Material\ Price\ Variance = (Standard\ Price - Actual\ Price) \times Actual\ Units

= ($2.50 - $2.35) \times 20,000 pounds

= $3,000

As the actual rate is less than standard rate the variance is favorable.

Material\:Quantity\ Variance = (Standard\ Quantity - Actual\ Quantity) \times Standard\ Rate

Standard Quantity = 4,000 \times 4.6 = 18,400 pounds

Material Quantity Variance = (18,400 - 20,000) \times $2.50

= - $4,000

As the actual raw material quantity used is higher than standard raw material quantity the variance is unfavorable.

2. Labor Variances

Labor\ Rate\ Variance = (Standard\ Rate - Actual\ Rate) \times Actual\ Hours

= ($18 - $19.9) \times 750 = - $1,425

As actual rate is higher than standard rate thus the variance is unfavorable.

Labor\ Efficiency\ Variance = (Standard\ Hours - Actual\ Hours) \times Standard\ Rate

Standard Hours = 4,000 \times 0.2 = 800

Labor Efficiency Variance = (800 - 750) \times $18

= $900

As the Standard Hours is more than Actual Hours the variance is favorable.

1. Material Variances

Material Price Variance = $3,000 F

Material Quantity Variance = $4,000 U

2. Labor Variances

Labor Rate Variance = $1,425 U

Labor Efficiency Variance = $900 F

6 0
3 years ago
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kifflom [539]

Answer:

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Explanation:

7 0
2 years ago
Manufacturing overhead was applied to production at 60 percent of the direct labor cost of $10,000. The entry under perpetual in
tamaranim1 [39]

Answer:

Dr Work in Process Inventory for $6,000

Cr Manufacturing $6,000

Explanation:

Preparation of The journal entry under perpetual inventory procedure

Based on the information given if the Manufacturing overhead was applied to production at 60% of the direct labor cost of the amount of $10,000 which means that The journal entry under perpetual inventory procedure is :

Dr. Work in Process Inventory for $6,000

Cr Manufacturing $6,000

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4 0
3 years ago
Harry, Hermione, and Ron formed an S corporation called Bumblebore. Harry and Hermione both contributed cash of $29,400 to get t
Anna007 [38]

Answer:

$29,400; $29,400 and $18,400

Explanation:

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Harry's basis is equal to cash contributed which is $29,400

Hermione's basis is equal to cash contributed which is $29,400

Ron's basis = Basis of parcel of land - Mortgage value

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                   = $18,400

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2 years ago
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Pavlova-9 [17]

Answer:

The correct answer is location economies

Explanation:

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In determining this location,companies usually consider cultural,economic and legal perspectives,in that they are able to locate their manufacturing outfits where the combination of these factors is most favorable.

The ease of transporting output and trade barriers are also examined such that the goods produced can be transported to consuming nations all around the world without logistics headache or trade sanctions.

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