P9-2: Cost of debt using both methods Currently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 7% coupon rate. Because cur-rent market rates for similar bonds are just under 7%, Warren can sell its bonds for $1,010 each; Warren will incur flotation costs of $30 per bond in this process. The firm is in the 40% tax bracket. a. Find the net proceeds from sale of the bond, Nd. b. Show the cash flows from the firm’s point of view over the maturity of the bond. c. Calculate the before-tax and after-tax costs of debt. d. Use the approximation formula to estimate the before-tax and after-tax costs of debt. e. Compare and contrast the costs of debt calculated in parts c and d. Which approach do you prefer? Why?

Answers

Answer 1

Answer and Explanation:

The computation is shown below:

a. The Net proceeds from the sale of Bond are

= $1010 - $30

= $980

b. The streams of money should be reflected from the perception of an organization for over the security development

Year 0

Cash inflow

Years 1 to 14 Cash outflow

Year 15

Net cash outflow

$980

($120) each year

($1,120) ($120 coupon + $1000 maturity)

c. The before tax cost of debt is 7%

And, the after tax cost of debt si

= 7% × (1 - 0.40)

= 4.2%

d. The Before Tax Cost of Debt is

= ($120 ÷ $980) × 100

=  12.24%

And,

After tax Cost of Debt is

= 12.24% × (1 - 0.40)

= 7.35%

d. Both methods should be considered and also they are based on the available resources. If we considered the financial calculator than use the first one and also the first one is relevant as it shows the accurate results


Related Questions

Consider the following statements: a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. c. Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives? Group of answer choices

Answers

Answer:

All of the above.

Explanation:

In economics, it is believed that economic agents which include consumers and producers allocate their scarce resources to the utility/service, and product which would result in the biggest gain. This is done in a bid to not misallocate resources.

All the above-mentioned scenarios represent cases wherein economic agents respond to incentives. For example, in the first case, the consumers of gasoline who are the economic agents would want to allocate a lower price to get more gasoline. The extra gasoline they would get from this gas station is the incentive.

______________ is the process of taking a creative idea and turning it into a useful product, service, or method of operation.
A. Interpretive thinking
B. Opening a window of opportunity
C. Imagination
D. Creativity
E. Innovation

Answers

Answer:

innovation

Explanation:

Innovation is the process of taking a creative idea and turning it into a useful product, service, or method of operation. Thus, option 'E' is the correct option.

What is innovation?

The creation of more efficient goods, procedures, services, technology, works of art, or business models, which innovators then make available to consumers, governments, and society as a whole, is a common way that innovation occurs. Innovation and invention are closely related, but they are not the same thing. While some innovations call for a new invention, not all do. Innovation is more likely to involve the practical application of an invention (i.e., new/improved ability) to make a significant impact on a market or society.

When a technical or scientific problem needs to be solved, technological innovation frequently takes the form of an engineering solution. Exnovation is the reverse of innovation. Innovation generally differs from creativity in that it places more emphasis on the application of creative ideas in an economic context.

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When Rita Thomas’s clothing company began to market its line of inexpensive cotton shirts in Africa, it assumed that it would be able to use its television and print advertising that had worked in the United States and other countries. However, the company soon learned that literacy rates and access to television in other areas of the world were not comparable to the level prevalent in the home country. The factors that created difficulties for Rita’s company in this scenario can be regarded as

Answers

Answer:

foreign environment (uncontrollable

In which of the following economic systems is the government's role greatest?


O Mixed

O Traditional

O Market

O Command​

Answers

Answer:

command has the government role

Which best summarizes the purpose of a W-4 form?
1. It helps determine the amount of taxes withheld from an individual's paycheck.
2. It helps determine when taxes are due and if money is owed to the IRS.
3. It helps determine whether a person has dependents who must also pay taxes.
4. It helps determine when a person needs to pay local income taxes.

Answers

The statement that best summarizes the purpose of a W-4 form is It helps determine the amount of taxes withheld from an individual's paycheck.

What is Form W-4?

Form W-4  provide information about employer, as well as employee's filing status and also amount to withhold from each paycheck.

It can be used to derive information about  the amount of taxes withheld from an individual's paycheck, therefore, option 1 is correct.

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The purpose of a W-4 form is it helps determine the amount of taxes withheld from an individual's paycheck. Thus, option 1 is correct.

What is W-4 form?

Employees must complete Form W-4, an Internal Revenue Service (IRS) tax form, to disclose their tax condition to their employer. Based on the employee's marital status, number of benefits and dependents, and other considerations, the W-4 form instructs the employer how much tax should be deducted from the employee's paycheck. Employee's Withholding Allowance Certificate is another name for the W-4.

Employees complete a W-4 form to inform employers of the amount of tax to deduct from their wages based on their marital status, the number of exemptions they are eligible for, the number of dependents they have, etc. The amount withheld from the paycheck is reduced when there are more allowances listed on the form. When a taxpayer's situation changes, such as when they move, they can submit a new W-4 at any time.

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What is meant by the economic problem?

Answers

Answer:

hey! hope this helps love! Economic problems asserts that an economy's finite resources are insufficient to satisfy all human wants and needs. Economics involves the study of how to allocate resources in conditions of scarcity.

Create a scenario that includes at least 3 needs and 3 wants. HELP ME WITH THIS IS FOR A Business class

Answers

A family has bought a new, luxurious house with a swimming pool and have constructed a basketball court in their huge backyard. They have filled their fridge with food like fruits, vegetables, bread and milk. They have also bought enough water bottles to last a whole week. They have arranged their clothes into the cupboards of their new rooms and have bought some pet toys and beds for their cats.

Scenario 1: Jack and Jill are looking to purchase their first home and we need to discover what their debt-to-income ratios are. Jack makes a gross income of $4,567 a month while Jill makes a gross monthly income of $3,200. Jack and Jill have a mortgage payment of $750 a month. They also have credit card payments of $50 and $25 a month, they have two car payment one for $111 (which will be paid off in 6 months) and $256. They also pay $120 for their cell phone and make a monthly contribution to their 401K of $1,200. What is their front end and back end DTI

Answers

Answer:

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ا ago

Answer:

ansrwer is long i cannot understand

Explanation:

plsease help me

Money, materials, staff, and assets are examples of *

Answers

Answer:

Business Or Banks.

Explanation:

Answer:

resorses  

Explanation:

The President asks Congress to approve a budget in which individual income taxes are raised by 5%. Explain how this could affect the circular flow model.

Answers

Answer:

With no budget, Congress must pass a continuing resolution to fund the government temporarily. ... If Congress can't agree on 12 separate appropriations bills, it can pass an Omnibus bill that includes multiple funding areas. If the President signs that, the budget becomes law and goes into effect.

Explanation:

Sorry if this didn't help!

In a condition where the President asks Congress to approve a budget in which individual income taxes are raised by 5%, it will affect the circular-flow model by leading to a decrease in the disposable income of the individuals.

What is the significance of circular flow model?

A circular flow model can be referred to or considered as a model that represents the drivers and determinants of the money, such as cash flow in an economy, and the goods and services being traded in an economy during any given period of time.

If the taxation on individual income is hiked by 5 percentage, the cash flow in the economy will be decreased, as well as due to a decreased disposable income, the demand for goods and services in an economy will also be reduced.

When the rates of taxation are increased by approximately 5%, the circular flow model will be severely affected

Therefore, the significance regarding circular flow model has been aforementioned.

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What are the four steps you can take if you are at risk of becoming unemployed

Answers

Answer:show up on time, accept overtime

Explanation:

when would you write a report

Answers

Answer:

You write a report when u r being asked.

Explanation:

hope that will help you.

how does better equipment affect Labour productivity

Answers

Answer:

It helps get everything done faster and better.

Explanation:

If you're using good tools obviously you'll get a better outcome in a better time.

Pert networks use a simple statistical method to determine the most likely task completion times. describe how expected activity times and variances can be computed in a pert network. describe a situation in which a project manager would choose pert for her project.

Answers

Answer: Pessimistic time- the optimistic time then divide that number by 6 and square root that number to get the final number.

Explanation:

They can be computed by pessimistic time- the optimistic time divide the number by 6 and square root the number gotten to get the final answer

A manager will choose pert for her project due to uncertainties as regards weather, supplies and availability of labour which would all insert variances into her estimated activity upon completion.

Explain what is meant by the business entity concept?

Answers

The business entity concept. The business entity concept states that the business is separate from the owner(s) of the business. Therefore the accounting records for even the simplest business, the sole trader, must be kept separate from the personal affairs of the owner or owners.

Which is not a limitation of Enterprise Risk Management (ERM)?
A. Errors, mistakes, or faulty judgment.
B. Absolute assurance of achievement of entity objectives.
C. Management override.
D. Control circumvention by collusion.
E. Cost verses benefit.

Answers

Answer:

B. Absolute assurance of achievement of entity objectives.

Explanation:

Enterprise risk management refers to managing risk for an enterprise. It is depends on the plan strategy for a business to identify and analyze the risk, dangers, hazards that could be in terms of physical or figurative also it interfers to the day to day operations and its objectives

Here, the second option represents the advantage of an enterprise risk management

Therefore the same is to be chosen

hence, the correct option is B.

Internal analysis enables a firm to determine what the firm:__________.
a. can do.
b. should do.
c. will do.
d. might do.

Answers

The answer is A: can do

If there is always a three-for-one tradeoff between goods X and Y, then the PPF between X and Y is:_______
a. a downward-sloping curve that is bowed outward.
b. a downward-sloping curve that is bowed inward.
c. a downward-sloping straight line.
d. an upward-sloping straight line.

Answers

Answer:

c. a downward-sloping straight line.

Explanation:

In case when there is a three for one tradeoff lies between the X goods and Y goods so the curve of PPF should be fall sloping contains straight line. This slope should be downward as it generated more and more of one goods and it could be sacrificed for the other good and the reason of the straight line is that here the opportunity cost would remain the same or constant

Therefore in the given case, the correct option is C.

A straight line, downward - sloping demand curve often mean that, as price falls, there is an elasticity of demand. If there is always a three-for-one tradeoff between goods X and Y, then the PPF between X and Y is a Downward-sloping straight line.

Trade-off is simply known as a situational decision. It is simply the reduction of one quality, quantity, or property so as to get gains in other areas.

It is simply known as where one thing increases, another have to decrease. it often arise from limitations of a lot of source.

It is often called a tactical or strategic choice made with full knowledge of the advantages and disadvantages of each decision.

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Describe how effective decision-making requires comparing the additional costs of alternatives with the additional benefits of alternatives.

Answers

Explanation:

Effective decision making requires comparing the additional costs of alternatives with the additional benefits. ... As long as the marginal benefit of an activity exceeds the marginal cost, people are better off doing more of it; when the marginal cost exceeds the marginal benefit, they are better off doing less of it.

Aptitude is the ability to evaluate your strengths and weaknesses (True or False)

Answers

Glad I can can Help!!!

Answer: True

Explanation:

Aptitude is the ability to evaluate your strengths and weaknesses. Entrepreneurship involves risk, which is both an advantage and a disadvantage. It is not necessary to determine how much money it will take to start a business because you will be able to borrow the money you need.

If satisfied with my answer please leave a review and give me brainiest :D

Answer:

False.

Aptitude is how well you are able to able to do something and the natural ability to do it

Hopefully this helps!

Feel free to mark brainliest!

Which of the following students is most likely to receive a merit-based scholarship?
A.
a student from a low-income family
B.
a student with a delinquency record
C.
a student from a political family
D.
a student with a high academic score
E.
a student from a middle-income family

Answers

Answer: (Unsure if apply more than 1)

I believe its D a student with a high academic score

They are because the more talented students will receive scholarships.

Explanation:

Answer:

D

Explanation:

Over the last few​ decades, East Asian economies have increased their share of world GDP.​ Similarly, intra-East Asian tradelong dashthat ​is, trade among East Asian nations long dash has grown as a share of world trade. More than​ that, East Asian countries do an increasing share of their trade with each other.Using the gravity​ model, explain why East Asian countries do an increasing share of their trade with each other.

Answers

Answer: Their GDP becomes larger as their trade volume grows

Explanation:

East Asian trade among themselves since they experienced a tremendous growth when they trade amongst themselves, this increases the effect of their GDP growth as their trade volume increase. The higher their trade, the more it plays na effect on the growth of their GDP. This is the reason why Asian countries trade amongst themselves.

U
1 point
You are at the checkout counter at the local supermarket, use your debit
card to pay for your groceries, and select "credit” when the cashier asks
"Debit or credit?" Where does the money for this purchase come from? *
Your credit card company covers the cost
O It is deducted directly from your checking account
Your credit card company provides you with a cash advance to cover the cost
It is deducted from your credit card account

Answers

Answer: It is deducted directly from your checking account

Explanation:

A Debit card is linked to your bank account so when it is used, it will always be deducted directly from your checking account.

The Debit or Credit option simply refers to how the transaction will be processed. With a Debit the transaction goes through a different computer network than the Credit which goes through the Credit computer network.

Bottom-line is that debit cards are bank accounts.

When Paul listened to the presidential candidate debates, he heard one candidate proposing to increase taxes and the other candidate responding that this would cause firms to decrease production. How would this be described by an economist?a) As taxes increase, there is an increase in supply. b) As taxes increase, there is a decrease in quantity supplied.c) As taxes increase, there is an increase in quantity supplied. d) As taxes increase, there is an increase in supply and in quantity supplied e) As taxes increase, there is a decrease in supply.

Answers

Answer:

e) As taxes increase, there is a decrease in supply.

Explanation:

            In the context, it is said that one of the presidential candidate in his presidential debate proposes to increase the taxes of the various goods and commodities in order to increase the government revenue through he tax paid by the citizens of the country. Whereas other candidate in the debate opposes such a proposal claiming that increasing tax will result in the decrease of the production of such goods and items in the firm.

           As an economist, I conclude that there is a relation between increase in tax and the production units. when the tax of a certain item is increased, its demand decreases in the market. The buyer has to pay more money and the producer or the seller receives less money, So the product demand decreases in the market. As the demand decreases, the firms produces less number of that items. Thus there is a decrease in the supply.

what to do if you have a student whos bad

Answers

Maybe punishment and let inform he’s parents

The survey that found 75% of consumers would consider going to another company after a bad customer service experience surprises some people because it seems almost too low. Why might that other 25% of consumers not be bothered by a bad customer service experience?

Answers

Answer:

They might not be bothered because nothing has happened yet.

Explanation:

The other 25 percent might not use it a lot.

When an sbu has become a _____________, it is essential to either invest in it heavily to gain better market share, acquire competitors to get the necessary market share, reposition its products, or drop it?

Answers

Answer:

problem child

Explanation:

A problem child is a business-related term that is used to describe a situation in which there is a form of low market share but in an increasing and quick thriving enterprise or industry at large.

Hence, in this situation, the correct answer is a PROBLEM CHILD.

Given that when an SBU has become a PROBLEM CHILD, it is essential to either invest in it heavily to gain better market share, acquire competitors to get the necessary market share, reposition its products, or drop it.

Whoever says I WIN first gets a brainliest

Answers

Answer:

I WIN

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Answer:

i win

Explanation:

:))))

The department heads of a plastics company sit down to discuss next year’s budget. Fabrication says that two of their extruders are outdated and need to be replaced. Accounting explains that without at least two more staffers, they can’t keep up with the books. Shipping wants additional funding to cover the rising cost of gasoline. Sales believes they could obtain more clients with a larger travel fund. Everyone wants a larger budget this year. Which strategy would be most effective in this situation?

Answers

Answer: Averaging

Explanation:

From the question, we are informed that the department heads of a plastics company sit down to discuss next year’s budget. We are informed that fabrication says that two of their extruders are outdated and need to be replaced; accounting explains that without at least two more staffers, they can’t keep up with the books; shipping wants additional funding to cover the rising cost of gasoline and that sales believes they could obtain more clients with a larger travel fund. It was realized that everyone wants a larger budget this year.

The strategy that'll be most effective in this situation is averaging. Averaging simply occurs when group members have to hassle, bargain and yhen negotiate before a compromise is reached. In this scenario, this will be the best option.

Which of the following is a difference between Fiedler’s contingency theory of leadership and the path-goal theory of leadership? Select one: a. The Fiedler theory states that a leader can adopt the four leader styles of directing, coaching, supporting, and entrusting, whereas the path-goal theory measures leadership style with the least preferred coworker scale. b. The Fiedler theory discusses leader style, followers and situation, and the rewards to meet followers' needs, whereas the path-goal theory discusses leadership style and group task performance. c. The Fiedler theory enables leaders to diagnose both leadership style and organizational situation, whereas the path-goal theory focuses on the characteristics of followers as the most important element of the situation. d. The Fiedler theory made the assumption that new leaders could take over as situations change, whereas in the path-goal theory, leaders change their behaviors to match the situation.

Answers

Answer:

d. The Fiedler theory made the assumption that new leaders could take over as situations change, whereas in the path-goal theory, leaders change their behaviours to match the situation.

Explanation:

Fiedler's theory of leadership is based on the assumption that the leaders can be different and their effectiveness can be measured as when the the situation changes. Accordingly he prefers new management to a new situation, rather than the old one.

Whereas the path goal theory of leadership is based on the assumption and study that allows the managers to change in their behaviours as and when their situation demands. This provides for better working environment and encouragement for employees.

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