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11111nata11111 [884]
2 years ago
5

Mariano Manufacturing can issue a 25-year, 8.8% annual payment bond at par. Its investment bankers also stated that the company

can sell an issue of annual payment preferred stock to corporate investors who are in the 25% tax bracket. The corporate investors require an after-tax return on the preferred that exceeds their after-tax return on the bonds by 1.0%, which would represent an after-tax risk premium. What coupon rate must be set on the preferred in order to issue it at par
Business
1 answer:
aivan3 [116]2 years ago
4 0

Answer: 10.13%

Explanation:

The after-tax return on the preferred shares would be:

= After-tax return + Premium required

= (8.8% * (1 - 25%)) + 1%

= 7.6%

For the preferred stock to be issued at par with the above after tax return:

= After tax return / ( 1 - tax)

= 7.6% ( 1 - 25%)

= 10.13%

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6 0
10 months ago
If the equilibrium price of avocados is $4 and the government issues a price ceiling of $4.50, what is likely to happen in the m
Marat540 [252]

Answer:

A surplus of avocados will result from the price ceiling.

Explanation:

A price ceiling is when the government or an agency of the government sets the maximum price for a good or service.

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The price ceiling ($4.50) is less than the equilibrium price ($4) of avocados. As a result, surplus would increase. The supply of avocados would exceed the demand because price ceiling is above equilibrium price

6 0
3 years ago
A bond has a $1,000 face value, a market price of $989, and pays interest payments of $69.50 every year. What is the coupon rate
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Answer:

6.95

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4 0
2 years ago
Assume that Saudi Arabia has production possibilities to produce either 100 barrels of oil using 100 worker hours or 25 bushels
Hatshy [7]

Answer: 10 bushels

Explanation:

If they produce 100 barrels of oil using 100 worker hours, it means that the number of work hours taken for 1 barrel is:

= 100 / 100

= 1 work hour

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= 25 / 100

= 0.25 bushels of corn

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2 years ago
Which of the following financial institutions has a membership requirement?
Dima020 [189]
A credit union often requires that its clients be members who own a share in the company.
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3 years ago
Read 2 more answers
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