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Sonja [21]
2 years ago
8

To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to ma

turity. This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $1,025, and has a par value of $1,000. If the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation? Do not round your intermediate calculations.a. 5.39%b. 6.09%c. 5.93%d. 5.93%e. 4.69%
Business
1 answer:
ArbitrLikvidat [17]2 years ago
8 0

Answer:

a. 5.39%

Explanation:

This question is asking for the after-tax cost of debt ;which is the YTM

Using a financial calculator, enter the following and adjust the time, and coupon payments to semiannual basis;

Maturity of the bond ; N = 20*2 = 40

Face value; FV = 1000

Price; PV  = -1,025

Semiannual coupon payment; PMT = (9.25%/2)*1000 =  46.25

then compute semiannual interest rate; CPT I/Y = 4.489%

YTM (Pretax cost of debt ) = 4.489% *2 = 8.98%

WACC uses the aftertax cost of debt;

aftertax cost of debt = pretax cost of debt (1-tax)

= 8.98% *(1-0.4)

= 5.388%

Therefore, the component cost of debt for use in the WACC calculation is 5.39%

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An employee submits a request for her light to be repaired, and her request spends two years in committee process. Meanwhile, he
ohaa [14]
<h2>The employee likely to continue to wait</h2>

Explanation:

a. Leave the organization: The employee is not willing to leave because she has placed the request and she has spent two years. So, it depicts that she would like to continue.

b. continue to wait: Yes the employee continues to wait because, it shows the patience level that the employee possess and her involvement towards the organization & commitment towards work.

c. ask a friendly colleague to help her fix the light: There is no evidence in the sentence about seeking help. So this choice is invalid.

4 0
2 years ago
In a perfectly competitive industry, the industry demand curve is ____, while in a monopolistic industry, the industry demand cu
antoniya [11.8K]

Answer:

The correct answer is downward sloping; downward sloping.

Explanation:

In a perfect competition the demand curve for an individual firm is a horizontal line parallel to the x axis. This happens because the firm is a price taker and operate on the price determined by the intersection of demand and supply curves. Any increase in the price will cause the demand to become zero.

While in the monopolistic market a single firm has downward sloping demand curve. Here, the firm is price maker and decides price level. Though, the consumers will demand more at lower price.

The industry supply curve for both will be downward sloping. This happens because, the firms consumers in a market will always demand more at low prices. The demand and price are inversely related.

8 0
2 years ago
In two paragraphs, compare secured and unsecured types of credit. Secured sources of credit include title loans and personal loa
grigory [225]

Secure credit is credit that is given with a connection to a piece of collateral, such as a car or a home. This means that, if you were to default on your payments, the lender would be legally entitled to taking possession of the collateral. An example of this is a car loan, which is a loan that is used to purchase a car. On the other hand, an unsecured loan is one that is not protected by any collateral. This means that the lender cannot immediately take your property of you default on the loan. An example of this is a credit card.

In the case of a secured car loan, interests tend to be lower because of the security that the collateral (the car) provides. Moreover, these loans tend to provide interest rates that are fixed, which means that it is easier to plan for this expense and avoid falling behind on payments. The risk for the lender is less with a secured loan, as he is able to take the property and resell it if the borrower is unable to repay the loan. On the other hand, credit card are riskier for the lender (the bank) as they are unsecured, and this means that they are unable to immediately take any property from the borrower who did not repay. Because of this high risk, interest rates also tend to be high.

3 0
2 years ago
Billingsley, inc. is borrowing $60,000 for five years at an apr of 8 percent. the principal is to be repaid in equal annual paym
alexandr1967 [171]
60,000 / 0.8 % = 75,000 loans
6 0
2 years ago
Suppose you are running a carnival. You are selling hamburgers and sodas. A hamburger is $1.75 and a soda is .75. You expect to
Sunny_sXe [5.5K]

Answer:

<em>Hamburgers = 27</em>

<em>Sodas = 93</em>

Explanation:

Let        x = Hamburgers

             y= Sodas

Now form a system of equation aX + bY = C

where

a= 1.75 = coefficient of variable X

b= 0.75 = coefficient of variable Y

C= 117.50

Put these values in above equation

           1.75x + 0.75y = 117.50 . . . . . (1)

Since I sold total of 120 hamburgers and sodas, we can write

            x + y = 120  . . . . . (2)

or          y = 120 - x          ....... put this value in eq.1

           1.75x + 0.75( 120 - x ) = 117.50

           1.75x + 90 - 0.75x = 117.50

            90 + x = 117.50

             x = 117.50 - 90

             x = 27     .......... put this in equation 2

     

          x + y = 120

          27 + y = 120

          y = 120 - 27

           y = 93

3 0
2 years ago
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