Using the following variables, calculate an organization's cost of debt on a $500,000 bond. • R₁: 1% • credit-risk rate: 5% • t: 15% O $30,000 O $25,500 O $29,550 O $4,500
Q: Your firm needs a computerized machine tool lathe which costs $50,000 and requires $12,000 in…
A: If the machine is sold above book value there will be capital gain tax which would reduce cash flow…
Q: n investor bought a stock for $15 (at t=0) and one year later it paid a $1 dividend (at t=1). Just…
A: The rate of return decreases due to inflation and real rate of return is much less than nominal rate…
Q: Your company currently has 7% coupon-rate bonds (coupons are paid semi-annually) with ten years to…
A: Compound = Semiannually = 2Assuming face Value = fv = $1000First BondCoupon Rate = c1 = 7 / 2 =…
Q: You have an opportunity to acquire a property from First Capital Bank. The bank recently obtained…
A: Here,Cost of Property $ 296,000.00Acquisition Expenses $ 12,100.00Monthly Repairing…
Q: A bond trader purchased each of the following bonds at a yield to maturity of 9%. Immediately after…
A: The bond that pays the perpetuity then means that the cash inflows from that bond will be forever…
Q: Determine the following for Tram-Ropes Limited: A. Total Market value of the firm’s capital…
A: The market value of a firm and the concepts of cost of capital and the weighted average cost of…
Q: The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place…
A: Present value factor or present value of annuity factor (PVA) is the metric used to compute the…
Q: Lai Xiaodong, a 22-year-old college-educated man, accepted a job at Foxconn Technology (where the…
A: Lai's hourly gross pay = Lai's daily pay / No of hours of work per dayLai's Weekly Gross pay =…
Q: If the annual inflation rate is 5.5 percent in the United States and 4 percent in the U.K., and the…
A: Real Exchange rate= (1+iUS)/((1+iUK)*(1+Depreciation))iUS is US inflation rateiUK is UK inflation…
Q: The calculation of WACC involves calculating the weighted average of the required rates of return on…
A: Preferred stock weight is stated as a percentage. It is a crucial part of the WACC computation,…
Q: fank made payments of $161 per month at the end of each month for 30 years to purchase a piece of…
A: Yield to maturity can be calculated by following function in excel=RATE (nper, pmt, pv, [fv],…
Q: Your company's stock sells for $50 per share, its last dividend (Do) was $2.00, its growth rate is a…
A: Current Price of Stock = p0 = $50Current Dividend = d0 = $2Growth rate = g = 5%Floation cost = fc =…
Q: Fun Land is considering adding a miniature golf course to its facility. The course would cost…
A: Net present value(NPV) is the difference between present value of all cash inflows and initial…
Q: The table shows a bank's balance sheet. The bank has no excess reserves and there is no currency…
A: The problem case wants to calculate the desired required reserve ratio for the bank. The required…
Q: ou estimate that you can save $3,900 by selling your home yourself rather than using a real estate…
A: In this question, we are required to determine the future value.
Q: Blue Angel, Inc., a private firm in the holiday gift industry, is considering a new proje The…
A: NPV is the most used Capital Budgeting technique used to evaluate the projects for the capital…
Q: You won the lottery and have a couple of choices as to how to take the money. Which choice yields a…
A: Present value refers to the current value of the future cash flows, discounted at an interest rate…
Q: What is the duration of an 8% coupon bond (coupons paid annually) with three years until maturity?
A: Bonds are the financial instruments issued by firms to holders for a specific time period. This is a…
Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…
A: Expected return of portfolio willl be calculated as follows:-Rp = (Rs*Ws)+(Rb*Wb)whereRp= Expected…
Q: mni.5 Andalusian Limited (AL) can borrow funds at an interest rate of 12.50% for a period of five…
A: The cost of debt is the expense incurred by the company annually to employ the debt capital, it is…
Q: (Loan amortization) Mr. Bill S. Preston, Esq. purchased a new house for $140,000. He paid $10,000…
A: Purchase Price = $140,000Down Payment = $10,000Time = t = 10Interest Rate = r = 7%
Q: Corey received a $36,750 loan from a bank that was charging interest at 3.50% compounded…
A: We need to use loan amortization formula below to calculate semi-annual payment. where P=Loan…
Q: Velcro Saddles is contemplating the acquisition of Skiers’ Airbags Inc. The values of the two…
A: Gain From Merger= administrative costs / Cost of capitalCost of the Cash Offered= Amount willing to…
Q: Your company has spent $380,000 on research to develop a new computer game. The firm is planning to…
A: Amount to be depreciated= 58000+6800= 64800$Depreciation for first year= 64800*10%= 6480
Q: 6. Your company's marketing department anticipates that in 3 years the sales price for your…
A: Money have time value and value today will not be same in future and value of money changes with…
Q: Assume that an investor short-sells 600 shares of stock at a price of $45 a share, making a 50…
A: a.The amount of money deposited is
Q: What is the nominal annual rate of interest compounded monthly if a 9-year loan of $57,300 is repaid…
A: Here,LoanAmount is $57,200Time Period of Loan is 9 yearsMonthly Payment of Loan is $781.91
Q: A weaker dollar places pressure on U.S. inflation, which in turn places------ pressure. on u.s.…
A: In this question, we are required to fill in the blanks.
Q: Assume that the following quote for the Walt Disney Company, a NYSE stock, appeared on some…
A: Variables in the question:The Walt Disney Company (DIS) - NYSE136.55 +2.76 (+2.06%)Prev Close:133.79…
Q: Ghost Riders Co. has an EPS of $1.64 that is expected to grow at 8.4 percent per year. If the PE…
A: Expected EPS after 7 years= EPS today ( 1 + g ) ^7Price after 7 Years= EPS after 7 years * PE ratio
Q: Allenwood Inc. has provided the following data concerning an investment project that it is…
A: Net present is the difference between present value of all cash inflow and initial investment. NPV =…
Q: The increase in saving account deposits would Select one: a. increase M1. b. have no effect on M2.…
A: In this question, we are required to determine the impact of increase in saving account deposits.
Q: Given the following information, how many times does the firm turnover its inventory during the…
A: Inventory turnover ratio is computed as follows:-Inventory turnover ratio =
Q: A bond that settles on June 7, 2016, matures on July 1, 2036, and may be called at any time after…
A: Yield to maturity can be calculated by following function in excel=RATE (nper, pmt, pv, [fv],…
Q: LO3,4 3. Calculating expected return on a stock. The price of Outdoor Designs, Inc. is now $85. The…
A: The approximation yield formula will be used in the given case to find the return rate that an…
Q: a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your…
A: Terminal value is the estimated value of a business or an investment at the end of a business or an…
Q: A project will generate before tax cost savings of $110,000 per year, for five years, create…
A: Cash flows from an investment can be referred to as net income after adding depreciation back to it…
Q: We project unit sales for a new household-use laser-guided cockroach search and destroy system as…
A: Net Present Value (NPV) is a financial concept widely used in investment analysis and capital…
Q: Consider the following table for a period of six years. Returns Large-Company Stocks -14.69% -26.47…
A: a&b. Calculation of the arithmetic average and standard deviation of the returns:Formula used:
Q: John Naylor, CFA, has been asked to value SCSU Corporation by using FCFE model. John believes that…
A: Terminal Value is calculated as follows:-Terminal value = whereFCFE =current free cash flows to…
Q: A bond has the following terms: 1) $100 face value, 2) 3-year maturity and 3) 15% annual coupon…
A: The weighted average measure of the bond's value today and its sensitivity to the changes in the YTM…
Q: Gee-Gee's just paid an annual dividend of $2 a share. The company adheres to a constant rate of…
A: Current Dividend = d0 = $2Growth Rate = g = 2.5%Discount Rate = r = 11.2%
Q: Calculate the yield from an investment in a 60-day bank-accepted bill purchased at 5.25% and sold 30…
A: Need to consider the difference in interest rates, the holding period, and the face value of the…
Q: A $1,000 Face Value Treasury bond with 18 months left to maturity has annual coupons of $32 paid…
A: Yield to maturity is the rate of return that the investor or holder earns by holding the bond till…
Q: An investor has $100,000 to invest. If she invests 40% in Stock A, 30% in Stock B, and the remainder…
A: Weight of Stock A = wa = 40%Weight of Stock B = wb = 30%Weight of market index exchange traded fund…
Q: Balance Sheet You are evaluating the balance sheet for Cypress Corporation. From the balance sheet…
A: Cash and Marketable Securities = c = $670,000Accounts Receivable = ar = $870,000Inventory = i =…
Q: Suppose the price of the stock falls for the rest of the day, eventually closing at a price of…
A: In financial markets, investors and traders can use several types of orders to buy or sell…
Q: You purchase a zero coupon bond with 12 years to maturity and a yield to maturity of 4.93 percent.…
A: Zero coupon bonds are not given any coupon but are issued at discount and discount is implicit…
Q: 6. Given the following data: 10.4, What is the optimum portfolio under a single index model assuming…
A: The portfolio variance is 10.4%.The risk-free rate is 4.7%.
Q: Please do this in Excel using relevant formulas. Stock A has a beta of 0.5, and investors expect it…
A: CAPM stands for capital asset pricing model. CAPM shows the relationship between expected return and…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
- Bond Yield and After-Tax Cost of Debt A companys 6% coupon rate, semiannual payment, 1,000 par value bond that matures in 30 years sells at a price of 515.16. The companys federal-plus-state tax rate is 40%. What is the firms after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.)A company issued bonds with a $100,000 face value, a 5-year term, a stated rate of 6%, and a market rate of 7%. Interest is paid annually. What is the amount of interest the bondholders will receive at the end of the year?Vigo Vacations has $200 million in total assets, $5 million in notes payable, and $25 million in long-term debt. What is the debt ratio?
- USAir has $54 million of current assets and $58 million of noncurrent assets. It forecastsan EBIT of $10.4 million and pays income taxes at a 35% rate. Short-term bank notes carry a 5%interest rate, and the company can issue long-term bonds at 7%. The company has set a targetdebt ratio of 45%. Required: I need assistance with Part D. Thanks for your help! A. For a maturity mix of 60% current and 40% long-term debt, prepare the company'sabbreviated balance sheet. B. For a maturity mix of 60% current and 40% long-term debt, prepare the company'sfinancial half of its income statement. C. Based on the financial statements above, calculate the return on equity ratio in order toevaluate the company's risk and return. D. Based on the financial statements above, calculate the current ratio in order to evaluatethe company's risk and return. Transcribed Image Text:A Current assets Noncurrent assets Total Assets Current liabilities Long-term liabilities Total debit Stockholders' equity Total…DIRECTIONS: Read and analyze the following problems and supply what is required and support it with necessary computations. 1. A company plans to issue a 25-year bond with a 12.5% interest rate, issued at a face value of P1, 000. The company is subject a 30% tax rate and expects a return on investment at 8%. Compute for the cost of debt issuance.Wilderness World (WW) needs to raise $84 million in debt. To issue the debt, WW must pay its underwriter a fee equal to 3% of the issue. The company estimates that other expenses associated with the issue will total $487,000. If the face value of each bond is $1,000, how many bonds must be issued to net the needed $84 million?
- Consider the following balance sheet for Northern Highland Credit Union (NHCU) before answering parts (i) through (v). Assets ($ million) $ Liabilities ($ million) $ Cash 30 Overnight interbank borrowing (7.00%) 160 T-notes 2 month (7.05%) 60 2-year CD (5%) 20 T-notes 3 months (7.25%) 80 7 year fixed rate Subordinated debt (8.55%) 150 T-notes two-year (7.50%) 60 Equity 25 T-notes 10-year (8.96%) 100 Corporate bonds (>5 years to maturity) 25 Total assets 355 Total liabilities and Equity 355 What is the repricing (funding) gap over the 0-to-6 months maturity bucket?1. ABC will be issuing a 4% P20,000,000-face value bonds. The underwriter will be charging 2% of face value as its fee. ABC is taxed at 20%. How much is the effective cost of the bonds?Telecom Systems can issue debt yielding 7 percent. The company is in a 30 percent bracket. What is its aftertax cost of debt? (Input your answer as a percent rounded to 2 decimal places.)
- If the bonds payable account has a balance of $900,000 and the discount on bonds payable account has a balance of $72,000, what is the carrying amount of bonds? A. $828,000 B. $900,000 C. $972,000 D. $580,000In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. NIM=Profit/Interest revenue Bank A Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 The amount of G-bond is $50 $70 $20 $40 $80 $60 $30 $10Telecom Systems can issue debt yielding 4 percent. The company is in a 25 percent bracket. What is its aftertax cost of debt?