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Elodia [21]
3 years ago
9

The Holmes Company's currently outstanding bonds have a 8% coupon and a 13% yield to maturity. Holmes believes it could issue ne

w bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Holmes's after-tax cost of debt?
Business
1 answer:
Marina86 [1]3 years ago
7 0

Answer: 8.45%

Explanation:

From the question, we are informed that Holmes Company's currently has an outstanding bonds and has a 8% coupon and a 13% yield to maturity.

We are further told that Holmes believes it could issue new bonds at par that would provide a similar yield to maturity and that its marginal tax rate is 35%.

Holmes's after-tax cost of debt will therefore be calculated as:

= Yield to maturity × (1 - Marginal tax rate)

= 13% × (1 - 35%)

= 13% × (65%)

= 0.13 × 0.65

= 0.0845

= 8.45%

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Answer:

I agree with Carr's position.

Explanation:

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7 0
3 years ago
Suppose the value of the price elasticity of supply is 4. what does this mean? a 1 percent increase in the price of the good cau
Aleonysh [2.5K]

A. 1% increase in the price of the good causes the supply curve to shift upward by 4 percent.

8 0
3 years ago
. Dallas Wildcat Drilling Co. sells an oil-drilling rig for $3,000,000. The drilling rig was purchased in 2013 for $2,000,000. D
olga2289 [7]

Answer:

$2,200,000 gain

Explanation:

When the amount received from the disposal of an asset is lower than the carrying or net book value (NBV) of the asset, the company makes a loss on disposal otherwise, the company makes a gain on disposal.

The carrying amount of the asset is the difference between the asset's cost and accumulated depreciation as at the date of disposal.

Asset NBV = $2,000,000 - $1,200,000

= $800,000

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5 0
3 years ago
Which of the ten knowledge areas defined in the Project Management Body of Knowledge includes the processes required to ensure t
strojnjashka [21]

Answer:

Project Scope Management is the applicable knowledge area.

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5 0
3 years ago
The financial statements of Georgi Manufacturing Company report net sales of $595,000and accounts receivable of $80,000 and $60,
Elena-2011 [213]

Answer:

43 days

Explanation:

The first step is to calculate the account receivable turnover

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= 595,000/140,000/2

= 595,000/70,000

= 8.5

Therefore the average collection period can be calculated as follows

= 365 /8.5

= 42.9

= 43 days

7 0
2 years ago
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