Answer:
Since the bond's coupon rate is identical to the market rate, then they should have been sold at face value. Since we are not given any costs associated to the issuance, then I will assume it is $0.
January 1, bond issuance:
Dr Cash 650,000
Cr Bonds payable 650,000
December 31, coupon payment:
Dr Interest expense - bonds 78,000
Cr Cash 78,000
Answer:
Convertible Bonds
Explanation:
Convertible Bonds are debt securities which yield annual coupon rate of return, are redeemable after a period and during their life provide an option to the holder of such securities to get these converted into common stock based upon the conversion ratio.
Conversion ratio refers to the number of common stock that would be issued in return for a bond.
In the given case, Harry holds a security which provides him fixed return by law i.e obligatory for the borrower to pay him interest every year, expire after 10 years i.e period to maturity in addition to allowing him a conversion ratio of 50 i.e 50 common stocks for every bond held.
Thus, Harry owns a 10 year convertible bond.
Answer:
elasticity of demand is 2.16. Consumers pay a smaller portion of the tax
Explanation:
Elasticity of demand measures the responsiveness of quantity demanded to changes in price.
Elasticity of demand = percentage change in quantity demanded / percentage change in price
(2/19)(2/41) = 2.16
When the coefficient of elasticity is greater than 1, demand is elastic.
Elastic demand means that a small change in price leads to a greater change in quantity demanded.
Because demand is elastic, more of the burden of the tax falls on producers and consumers pay a small portion of the tax.
I hope my answer helps you
C. Sales Tax We are actually learning the same thing I just looked at my paper and it was correct. Hope this helps.
Answer:
c. 15.8%
Explanation:
The cost of equity is the WACC (weighted average cost of equity)
WACC formula = wE*rE + wD*rD(1-tax) , whereby
wE = weight of equity = 65%
rE = cost of equity = 20%
wD = weight of debt=35%
rD(1-tax ) = after tax cost of debt =8%
WACC = (0.65 *0.20) + (0.35*0.08)
= 0.13 + 0.028
= 0.158 or 15.8%
Therefore, the overall cost of capital is 15.8%
