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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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gayaneshka [121]
A company made a profit of $25,000 over a period of 5 years on an initial investment of $10,000. What is its annualized ROI?

Answer: Out of all the options shown above the one that best represents the annualized ROI is answer choice C) 30%. To solve this you first need to determine the data that will be needed to solve it. In this case the initial investment which is 10,000, the total profit: 25,000, and finally the total number of years: 5. Then we simply use the following formula: Return on Investment = (Gain from Investment - Cost of Investment)/ cost of investment. You then multiply the result by 100% and finally divide by the number of years which in this case is 5.

I hope it helps, Regards.
7 0
2 years ago
Read 2 more answers
Mary’s hourly wage is twice that of John’s. John’s and Dennis’ hourly wages together total $60. If Dennis earns 1/3 of John’s ra
kolezko [41]

Answer: $90

Explanation: This problem can be solved by using following equation :-

Let John's hourly wage rate be J, Mary's hourly wage rate be M and Dennis hourly wage rate be D, therefore :-

Mary's rate will be :-

M = 2J............equation 1

AND,

J + D = $60 ..... equation 2

Similarly,

D = 1/3J

Now,putting the value of D in equation 2 we get,

J + 1/3J = $60

J  = $45

Putting the values of J in equation equation 1 we get,

M = 2 * $45

   = $90

So, Mary's hourly wage rate is $90

3 0
2 years ago
Select the correct answer. The Patterson family decides to eat out at a new restaurant rather than at their regular diner. What
BigorU [14]

Answer:

B.Variety-Seeking

Explanation: Consumers engage in variety-seeking buying behavior for products that have low involvement and significant brand differences. For Example, soft drinks are low-involvement products that have DIFFERENCES in taste among brands. A consumer buying one type of cola might decide to <u>buy another brand of cola the next time to experience a variety in taste. </u>

<u></u>

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2 years ago
You agree to sell your car to your neighbor for $5,000. you and your neighbor have provided each other:
aivan3 [116]
<span>This type of agreement would be called a consideration. This is an agreement that provides a type of value to both parties involved and promises a certain performance by one party to the other. In this case, one thing is given for another, the money for the car.</span>
4 0
2 years ago
Sunn Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and p
romanna [79]

Answer:

$55,660

Explanation:

Given that,

Fixed cost per unit = $48,400

Variable cost per unit = $1.20

Actual level of activity = 6,050 units

Manufacturing overhead:

= Fixed cost per unit + (Variable cost per unit × actual level of activity)

= $48,400 + ($1.20 × 6,050 )

= $55,660

Therefore, the manufacturing overhead in the flexible budget for November would be closest to $55,660.

5 0
2 years ago
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