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SVEN [57.7K]
2 years ago
11

Electronic Products has 22,500 bonds outstanding that are currently quoted at 101.6. The bonds mature in 8 years and pay an annu

al coupon payment of $90. What is the firm's aftertax cost of debt if the applicable tax rate is 34 percent?
Business
1 answer:
valentinak56 [21]2 years ago
5 0

Answer:

5.75%

Explanation:

to determine the effective cost of the debt, we can use an excel spreadsheet and the IRR function:

  • present value = -1,016
  • payments 1 - 7 = 90
  • payment 8 = 1,090

effective interest rate = 8.71%

we can also calculate the answer using the annuity and present value formula:

1,016 = [90 x ({1 - [1 / (1 + i)⁸]} / i)] + [1,000 / (1 + i)⁸]

but it's much more complicated and the result is the same.

since the effective interest rate = 8.71%, then the after tax rate = 8.71% x (1 - 34%) = 8.71% x 0.66 = 5.7486% ≈ 5.75%

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<span>The best advice to be given to Ms. Lee in regards to the scenario is that she has the eligibility for a SEP in which she could enrolled in before she could even move to the location where she would likely be residing to. With this plan, if she notified about moving earlier or in advance, the period will only last for about two months in addition.</span>

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2 years ago
Read 2 more answers
Kasravi Co. had net income for 2011 of $300,000. The average number of shares outstanding for the period was 200,000 shares. The
yuradex [85]

Answer:

$1.49 per share

Explanation:

The calculation of diluted earnings per share is given below:-

Diluted shares outstanding= $200,000 + 12,000 × ($36 - $30) ÷ 36

= $200,000 + 12,000 × 6 ÷ 36

= $200,000 + 2,000

= $202,000

Diluted earnings per share = Net income ÷ Diluted shares outstanding

= $300,000 ÷ $202,000

= $1.49 per share

Therefore for computing the diluted earnings per share we simply divide the net income by diluted shares outstanding.

5 0
2 years ago
Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband william to work for her. Together
Grace [21]

Answer:

Marginal product is the addition to the number of goods produced when 1 worker is added to the workforce. In this case one worker will be added to the workforce if William is hired. When will is hired the bouquets per day increase from 20 to 35. This means that the addition to the number of bouquets is 15(35-20). So When William is hired the number of goods increase by 15 which means William's Marginal product is 15.

Explanation:

4 0
2 years ago
A major liquor store finds that it sells an average of 100 bottles a week of regular 750 ml bottles of Jameson Irish Whiskey. As
Semmy [17]

Answer:

  • 0.04 year
  • 200 bottles
  • 100 bottles
  • 250
  • 200

Explanation:

A)  The current order cycle length = 2 weeks

= 2 / 50 year = 0.04 year

B) The current order size

cycle time ( 2 weeks ) * demand per unit time ( 100 bottles )

= 2 * 100 bottles = 200 bottles

C) average inventory

= order size / 2 weeks = 200 / 2 = 100 bottles

D) calculate how much the liquor store spend per year on ordering

first we calculate the number of orders per year = 50 / 2 = 25

next the amount spent per year on ordering = 25 * 10 = 250

E) calculate  inventory holding costs per year

= average inventory * cost of holding per bottle

= 100 * 2 = 200

7 0
1 year ago
Jackson Electric Services Company incurred​ $800 as a repair expense and paid for it in cash. The company is a sole proprietorsh
almond37 [142]

Answer: Option D

Explanation: Owners equity refers to the amount of funds made available by the owners to operate the business activities. It includes initial capital invested and profits generated for the period

In the given case, the expense of $800 did not bring any assets or liabilities to the entity. Such an expense will be recorded in income statement leading to decrease in profits, thus, resulting in decrease in owners equity.

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2 years ago
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