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My name is Ann [436]
1 year ago
5

A corporation has 10,000 bonds outstanding with a 6% annual coupon rate, 8 years to maturity, a $1,000 face value, and a $1,100

market price. The company’s 100,000 shares of preferred stock pay a $3 annual dividend, and sell for $30 per share. The company’s 500,000 shares of common stock sell for $25 per share and have a beta of 1.5. The risk free rate is 4%, and the market return is 12%. Assuming a 21% tax rate, what is the company’s Cost of bonds?
Business
1 answer:
stiv31 [10]1 year ago
3 0

Answer:

Year   Cashflow    [email protected]%      PV           [email protected]%     PV

               $                                 $                                  $

  0        (1,100)           1           (1,100)           1             (1,100)

1-8        47.4             5.3349  252.87      7.0197      332.73

 8       1,000             0.4665    465.5      0.7894       789.4

                                  NPV      (381.63)              NPV 22.13                    

Kd = LR     + NPV1/NPV1+NPV2    x (HR – LR)

Kd = 3       + 22.13/22.13 + 381.63   x (10 – 3)

Kd =  3       + 22.13/403.76 x 7

Kd = 3        + 0.38

Kd = 3.38%  

Explanation:

Cost of debt is calculated based on internal rate of return formula. In year 0, we will consider the current market price of the bond as cashflow. In year 1 to 8, we will consider the after-tax coupon as the cashflow. The after-tax coupon is calculated as R(1 - T).  R is 6% x $1,000 = $60 and tax is 21%. Thus, we have $60(1  - 0.21) = $47.4. then we will discount the cashflows for  8 years so as to obtain the internal rate of return. The internal rate of return represents cost of debt.

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Answer:

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Answer:

Correct option is B

more in supplier development for A items.

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In materials management, the ABC analysis is an inventory categorization technique. ABC analysis divides an inventory into three categories—"A items" with very tight control and accurate records, "B items" with less tightly controlled and good records, and "C items" with the simplest controls possible and minimal records.

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Ariana loves new electronic products, but she also wants to make sure she gets a good value for her money. Therefore, she typica
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Answer:

This question lacks answers. Here they are:

A) ​Early adopter  

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E) ​Laggard

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8 0
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g Tadeo Corp. has provided a part of its budget for the second​ quarter: Apr May Jun Cash collections $ 42 comma 000 $ 45 comma
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Answer:

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Cash balance at end of May is = Beginning cash balance in May + Cash collection in May - Purchase of Materials in May - Operating Expense in May = 37000 + 45000 - 7200 - 6000 = 68,800

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