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Annette [7]
3 years ago
6

Viserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 25 years to maturity that is

quoted at 91 percent of face value. The issue makes semiannual payments and has an embedded cost of 5 percent annually.a) What is the company's pretax cost of debt?b) If the tax rate is 24 percent, what is the aftrtax debt?
Business
1 answer:
Snezhnost [94]3 years ago
6 0

Answer:

Pretax    =  5.61%

After tax = 4.26%

Explanation:

The cost of debt will be the Yield to maturity of the bonds.

91 = present values of the 25 year annuity + present value of the maturity

There is no formula for exact YTM

we can either use excel or calculate by approximation:

In this case we will calcualte the YTM by aprroximation

YTM = 2\times (\frac{C + \frac{F-P}{n }}{\frac{F+P}{2}})

C= 25 cuopon payment 1,000 x 5% / 2 becayse paymenr are semiannually

F= 1000 the face value is 1,000

P= 910  the present value or market value is 91% of the face value

n= 50   25 year at 2 payment per year

YTM = 2 \times (\frac{25 + \frac{1000-910}{50 }}{\frac{1000+910}{2}})

dividend 26.8

divisor 955

YTM 5.6125654%

This will be the pretax cost of debt

then we calculate the after tax cost of debt

pre-tax cost of debt ( 1 - t ) = after-tax

5.61% ( 1 - .24 ) = 4,2636

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Answer:

Dividend yield is 2.91 %.

Explanation:

Dividend yield = Annual Dividend per Share / Stock Price per Share × 100

<em>where,</em>

Annual Dividend per Share = Total Dividends ÷ Total Number of Shares

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                                              = $1.67

<em>then,</em>

Dividend yield = $1.67 / $57.48 × 100

                        = 2.905 or 2.91 %

4 0
2 years ago
Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividend of $8.50 per share and has announced that it w
Vadim26 [7]

Answer:

The correct answer is $65.90 (approx.)

Explanation:

According to the scenario, computation of the given data are as follows:

Dividend paid = $8.50

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We can calculate the current share price by using following method:

=[($8.5 + $6.5) ÷ (1 + 16%)^1] + [($8.5 + $6.5 + $6.5) ÷ ( 1 + 16%)^2] +[($8.5 + $6.5 + $6.5 + $6.5) ÷ (1+16%)^3] + [($8.5 + $6.5+ $6.5 + $6.5 + $6.5) ÷ (1+16%)^4

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3 0
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A current warehouse system has five warehouses with 4,000 units at each warehouse. The company desires to change to three wareho
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Answer:

Correct option is C.

15492 is the average ware-house inventory level.

Explanation:

A current warehouse system has five warehouses with 4,000 units at each warehouse. The company desires to change to three warehouses to become more centralized and keep the same customer service levels.

Average warehouse inventory levels =4000*5*(3/5)0.5 =15492

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A country cannot produce all of the medical equipment needed to treat its
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medical equipment is an essential material
5 0
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Read 2 more answers
Kelsey enjoys making cupcakes as a hobby and occasionally sells them for parties. Kelsey receives $1,000 in revenues from cupcak
laila [671]

Answer:

B) an increase of $1,000 (based on the new tax cut)

A) zero for years ended December 31th 2017 or before.

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The itemized deduction for hobbies is no longer valid in the new fiscal system.

In the previous tax laws Hobbies weren't treated as business as they seek enternainment not profit. It was available to deduct up to the revenues generates from the hobbies.

4 0
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