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11111nata11111 [884]
2 years ago
6

Kenny Electric Company's noncallable bonds were issued several years ago and now have 20 years to maturity. These bonds have a 9

.25% annual coupon, paid semiannually, sells at a price of $1,075, 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?a. 4.35%b. 4.58%c. 4.83%d. 5.08%e. 5.33%
Business
1 answer:
Tamiku [17]2 years ago
6 0

Answer:

d. 5.08% .

Explanation

Give that Kenny Electric Company's noncallable bonds were issued several years ago and now have 20 years to maturity. These bonds have a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000 and that if the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation . To do this our first step is to calculate the yield to maturity  (YTM)as follows :

46.25 * [1-(1+YTM/2)ˆ-40]/YTM/2 + 1000/(1+YTM/2)ˆ40 = 1075

Therefore ,YTM = 8.46%  . second step we need to calculate the cost of debt as follows . The cost of debt = 8.46% * (1-40%) = 5.08% . This means that the correct answer is d. 5.08% .

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d. Low levels of job specialization

Explanation:

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However, proper effective & efficient management cant be achieved without proper division of labour & specialisation of job. So, firms pursuing cost advantage have all features in their systems except 'Low levels of job specialization'

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2 years ago
Lucky louie just won the lottery!! he has a choice of taking $1,000,000 in cash or receiving $50,000 per year for 30 years begin
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8 0
1 year ago
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Anton [14]
The correct sentence is given below:
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The fifth amendment provides that government can buy land from private individuals to build community projects that are non profitable in nature, but the government has to pay the right amount of money for the land.
6 0
2 years ago
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Assume an unlevered firm has total assets of $6,000, earnings before interest and taxes of $600, and 500 shares of stock outstan
RideAnS [48]

Answer:

The amount of the change in the earnings per share as a result of this change in the capital structure will be $0.16

Explanation:

                                                                     all equity       equity and debt

expected EBIT                                               $600                  $600

interest                                                              (-)                     ($192)

profit before tax                                              $600                  $408

tax                                                                      (-)                         (-)

earnings to equity share holders                   $600                   $408

number of equity sahes                                    500                      300

earnings per share                                           $1.20                     $1.36

change in the earnings per share  = $1.36 -  $1.20

                                                         = $0.16

Therefore, The amount of the change in the earnings per share as a result of this change in the capital structure will be $0.16

7 0
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kozerog [31]

Answer:

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Rate for hours for Sunday is double

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