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Savatey [412]
2 years ago
13

Wind Power Systems has semi-annual bonds outstanding with a 5 percent coupon that will mature in 20 years. The face amount of ea

ch bond is $1,000. These bonds are currently selling for 114 percent of face value. What is the company's pre-tax cost of debt?
Business
1 answer:
Mashcka [7]2 years ago
5 0

Answer:

the pre tax cost of debt is 3.98%

Explanation:

The computation of the pre tax cost of debt is shown below;

Pre tax cost of debt is

= (Annual interest + (par value - market price) ÷ (number of years) ÷ (par value + market price) ÷ 2

= (0.05) + ($1,000 - $1,140) ÷ (20) ÷ ($1,000 + $1,140) ÷ 2

= 3.98%

Hence, the pre tax cost of debt is 3.98%

We simply applied the above formula so that the correct value could come

And, the same is to be considered

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Charlie sells cookies only in packages of 10. It costs him $3.50 in materials per package. Additionally, he has overhead costs o
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Let x represent the number of packages Charlie needs to sell to make a monthly income of $5, 000 
Since he sells cookies only in packages of 10 then he has to sell 10x to make that income. But Charlie has expenses that has to be deducted from his total sales to make that figure.  
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