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Ann [662]
2 years ago
9

Ace Industrial Machines issued 195,000 zero coupon bonds four years ago. The bonds originally had 30 years to maturity with a yi

eld to maturity of 5.2 percent. Interest rates have recently decreased, and the bonds now have a yield to maturity of 4.9 percent. If the company has a $73 million market value of equity, what weight should it use for debt when calculating the cost of capital
Business
1 answer:
hoa [83]2 years ago
8 0

Answer:

Coupon (R) = 0

Face value = $1,000

Years to maturity (n) = 30 years

Kd = 4.9% = 0.049

Po = R(1-(1+Kd)-n)/kd + FV/ (1+Kd)n

Po = 0(1-(1+0.049)-30/0.049 + $1,000/(1+0.049)30

Po = 0 + $238

Po = $238

                                                                        $

Market value of equity                                = 73

Market value of bond (195,000 x $238)    = 46.41

Market value of the company                       119.41

Weight of debt  = 46.41/119.41  x 100

Weight of debt = 38.87 = 39%

Explanation:

In this case, there is need to calculate the current market value of bond, which is the present value of coupon and the present value of face value of the bond. Then, we will calculate the market value of the company, which is the aggregate of market value of equity and market value of bond.

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On July 1,

Cash A/c                                  Dr. $439,200

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2 years ago
Which type of culture would most likely include characteristics such as openness, freedom, debate, and risk-taking?
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Answer:

e. diversity-focused

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-Ethical  culture refers to a culture in which people behave according to the group of values and standards set by the organization.

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According to this, the answer is that the type of culture that would most likely include characteristics such as openness, freedom, debate, and risk-taking is diversity-focused.

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When exchange rates change:
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Answer:

The correct answer is option B.

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The changes in the exchange rate will affect those domestic firms that sell their products in the foreign market or those domestic firms that produce and sell domestically but has foreign companies as competitors.  

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Wages can be defined as any monetary compensation paid by an employer to his/her employee for work done during a specific period of time. Payment may be calculated as a fixed amount for each accomplished task, or on hourly basis, daily rate, or based on the quantity of work done, which has been easily and adequately measured. The wages of this country if a efficiently calculated is $33 without trade and $50 with trade.

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