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Advocard [28]
3 years ago
15

g Shanken Corp. issued a 30-year, 6.2 percent semiannual bond 7 years ago. The bond currently sells for 108 percent of its face

value. The company’s tax rate is 35 percent. (Assume that the face value of one coupon bond is $1,000.) a. What is the pretax cost of debt? b. What is the aftertax cost of debt? c. Which is more relevant, the pretax or the aftertax cost of debt? Why?
Business
1 answer:
Anna35 [415]3 years ago
7 0

Answer and Explanation:

The computation is shown below:

a. Pre tax cost of debt is

Given that

NPER = 30 - 7 = 23 × 2= 46

PMT =$1,000 × 6.2% ÷ 2 = $31

FV = $1,000

PV = $1000 × 108% = $1,080

The formula is shown below:

= RATE(NPER,PMT,-PV,FV,TYPE) ×  2

AFter applying the above formula, the rate is 5.58%

b. The after tax cost of debt is

= 5.58% × (1 - 0.35)

= 3.63%

c. The after tax cost of debt would be considered more relevant

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Expenses and glide path are just two factors that investors should consider

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3 years ago
Question. Draw a marginal revenue curve of a perfectly competitive firm and explain why the marginal revenue of a perfectly comp
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If AR is constant, MR is equal to AR. Both are indicated by the same horizontal straight line(a situation of perfect competition)

<h3>What is the marginal revenue curve for a perfectly competitive firm?</h3>
  • Marginal revenue for a company with perfect competition is the same as average revenue and pricing.
  • This suggests that at values bigger than the average variable cost, the firm's short-run supply curve is its marginal cost curve.
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Marginal revenue is the change in total revenue when one more unit of a commodity is sold.

MR= change in TR/change in quantity sold

Average revenue refers to revenue per unit of output.

AR=TR/Q

Relationship between AR and MR:

If AR is constant, MR is equal to AR.

Both are indicated by the same horizontal straight line(a situation of perfect competition)

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8 0
1 year ago
A manager experiences a cashier shortage that averages $50. 00 per day. if the manager's operation is open 360 days per year, wh
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A manager experiences a cashier shortage that averages $50. 00 per day. if the manager's operation is open 360 days per year, 1800 will be this manager's annual revenue loss due to cashier shortages

In colloquial language, the average is a single number representing a list of numbers, usually the sum of the numbers divided by the number of numbers in the list. For example, the average of the numbers 2, 3, 4, 7, and 9 is 5.

Suppose there are four types of means: mean, mode, median, and range. In fact, the range is a measure of spread or spread, while others are the most common "measure of central tendency".

Noun. Mean, Mean, Median, Standard means something that represents the midpoint. The average is the quotient obtained by dividing the sum of a set of numbers by the number of numbers. scored an average of 85 points on the test. The mean is the simple mean or the middle value between the two extremes.

In colloquial language, the average is a single number representing a list of numbers, usually the sum of the numbers divided by the number of numbers in the list. For example, the average of the numbers 2, 3, 4, 7, and 9 is 5.

Suppose there are four types of means: mean, mode, median, and range. In fact, the range is a measure of spread or spread, while others are the most common "measure of central tendency".

Noun. Mean, Mean, Median, Standard means something that represents the midpoint. The average is the quotient obtained by dividing the sum of a set of numbers by the number of numbers. scored an average of 85 points on the test. The mean is the simple mean or the middle value between the two extremes.

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5 0
1 year ago
A bond with 15 detachable warrants has just been offered for sale at $1,000.00 . The bond matures in 25 years and pays a semi-an
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Answer:

$15.64

Explanation:

first we must determine the market value of the bond without the warrants:

PV of face value = $1,000 / (1 + 3.5%)⁵⁰ = $179.05

PV of coupon payments = $25 x 23.45562 (PV annuity factor, 3.5%, 50 periods) = $586.39

market value = $765.44

the market value of the 15 warrants = $1,000 - $765.44 = $234.56

market value per warrant = $234.56 / 15 = $15.64

6 0
3 years ago
How much was firm xyz's dividends per share if the firm paid $3.20 million in dividends and there were 4 million shares outstand
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Dividends per share by definition is how much did each share of the company receive in dividends.

You take the total dividend paid and divide by the number of outstanding shares

3.20 million / 4 million = dividends per share.

7 0
3 years ago
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