Answer:
d. 5.08%
Explanation:
We have to first calculate the YTM of the bond, and then apply the tax shield.
To get the YTM we have to calculate the rate of return of an annuity of 46.25 for 20 years compounding semiannually at IRR rate and the present value of the face value redeem in 20 years.


IRR = 0.084656891 (it should be done using financial calculator or excel or a similar software program)
then we apply the shield tax to the IRR:
IRR x (1 - tax-rate) = Cost of debt
0.084656891 * ( 1 - 0.4) = 5.0794= 5.08
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Answer:
a. 2019 Operating cash flow
Welland Co. Operating Cash Flow for 2019
Particular Amount $
Sales 162500
Cost of goods sold 80000
Other Expenses 3300
Depreciation 9000 <u>92,300</u>
EBIT 70200
Less: Taxes 22295
Add :Depreciation <u>9000</u>
Operating Cash Flow $<u>56905</u>
b. Cash flow to creditors
Interest paid 6500
Add: Loan raised <u>7700</u>
Cash flow to creditors <u>14200</u>
c. Cash flow to Stockholders
Dividends Paid 8150
Less: Net Equity Raised <u>4500</u>
Cash flow to Stockholders <u>$3650</u>
d. Change in Net working Capital = Change in Current Assets - Change in Liabilities
Figures for Current Asset was not given, rather the Net Fixed asset is given $21,100 which is not a current asset.