1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
MatroZZZ [7]
2 years ago
8

Several years ago the Haverford Company sold a $1,000 par value bond that now has 25 years to maturity and an 8.00% annual coupo

n that is paid quarterly. The bond currently sells for $900.90, and the company’s tax rate is 40%. What is the component cost of debt for use in the WACC calculation
Business
1 answer:
kodGreya [7K]2 years ago
4 0

Answer:

5.4%

Explanation:

Several years ago the Haverford Company sold a $1,000 par value bond that now has 25 years to maturity and an 8.00% annual coupon that is paid quarterly. The bond currently sells for $900.90, and the company’s tax rate is 40%. What is the component cost of debt for use in the WACC calculation

Face value of bond = coupon amount / interest rate

1000 = 80 / 8%

Therefore 900.9 = 80 / revised interest rate

multiply both sides by the 'revised interest rate

revised interest rate x 900.9 = 80

Hence, revised interest rate = 80  / 900.9 = 9%

Secondly if the company’s tax rate is 40%, the component cost of debt for use in the WACC calculation = kd (1 - t)

where:

kd = Cost of debt

t = tax rate

Therefore cost of debt for use in the WACC calculation = 9% (1-0.4) = 5.4%

You might be interested in
Benny asked his marketing team to research and collect data regarding the demographics of people residing in the state of Califo
anzhelika [568]

Answer:

C, Management Information System

Explanation:

5 0
3 years ago
1. One of the major changes resulting from managed care is the requirement of providers to assume accountability for: A. The tre
11111nata11111 [884]

Answer:

The correct answer is B) The appropriateness of interventions

Explanation:

Managed care is evolving in many countries around the world.

One of the ways in which changes are becoming more prevalent is in the managed care industry is that due to competition, that players are beginning to take seriously the quality of health care being given to enrollees.

All of this is happening simultaneously with the bid to provide these services at the lowest cost possible with providers playing for marketing share.

In Managed care, if customers are treated fairly, they are most likely to return thus creating the possibility for sustained organic growth.

Cheers!

4 0
3 years ago
Last year, Forest Products issued both 5-year and 10-year bonds at par. The bonds each have a coupon rate of 5.5 percent, paid s
Anna007 [38]

Answer:

Price at issuance is $1,000 for both bonds.

Price of the 5 year bond after the market rate increased to 7.4% is:

PV of face value = $1,000 / (1 + 3.7%)⁸ = $747.77

PV of coupon payments = $27.50 x 6.81694 (PV annuity factor, 3.7%, 8 periods) = $187.47

Market price = $935.24

this bond's price decreased by 64.76/1,000 = 0.06476 = 6.48%

Price of the 10 year bond after the market rate increased to 7.4% is:

PV of face value = $1,000 / (1 + 3.7%)¹⁸ = $519.97

PV of coupon payments = $27.50 x 12.97365 (PV annuity factor, 3.7%, 18 periods) = $356.78

Market price = $876.75

this bond's price decreased by 123.25/1,000 = 0.12325 = 12.33%

5 0
3 years ago
Which of the following questions is an example of macroeconomics?
alex41 [277]

Answer:

C. If federal taxes are decreased will consumer spending increase?

Explanation:

One keen question that falls under the domain of macroeconomics is the behavior of consumer spending when taxes are decreased.

  • Macroeconomics presents approaches the study of the economy in a holistic way.
  • Every aspect of the economy is considered before strategic economic decisions are taken.
  • Interest rates, inflation, unemployment rate, foreign trade etc. are all categorized under macroeconomics.
8 0
2 years ago
Mission Corp. borrowed $50,000 cash on April 1, 2016, and signed a one-year 12%, interest-bearing note payable. The interest and
ikadub [295]

Answer:$4,500---B, ie the 2nd option

Explanation:

From April to December we have 9 months

Interest Expense is given as Loan x Interest Rate x duration

Interest Expense = 50000 x 12% x 9/12 =

50,000x 0.12x9/12= $4,500

8 0
3 years ago
Other questions:
  • 2 a food pyramid consists of 10 million calories' worth of diatoms. how much of this is passed on to third level consumers, such
    13·1 answer
  • A monetarist would argue that a. prices are inflexible. b. wages are inflexible. c. changes in M in the short run can cause Real
    6·1 answer
  • True or false: if jacques's fire engines were a competitive firm instead and $160,000 were the market price for an engine, incre
    12·1 answer
  • What personal traits should you consider to help you decide on a possible career cluster?
    6·1 answer
  • URGENT!! Describe the attractions of growth stocks and value stocks.
    5·2 answers
  • Its retained earnings is the actual cash that the firm has generated through operations less the cash that has been paid out to
    10·1 answer
  • An instance where sellers should work to keep relationships with consumers is when they feel that the product
    12·1 answer
  • If the exchange rate between the u.s. dollar and the Canadian dollar is 1:1.3, which of the following is true
    10·1 answer
  • What are three thing an entrepreneur invest in his or her business
    9·2 answers
  • Discuss the implications of discarding the profit maximization assumption for the effectiveness and efficiency of the market sys
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!