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Bond Yield and After-Tax Cost of Debt
A company's 8% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $566.43. The company's federal-plus-state tax rate is 35%. What is the firm's after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.) Round your answer to two decimal places.
FASB 115 requires certain classifications within a bank's securities portfolio. What is the accounting treatment of securities within each classification? Describe why full market- value accounting might adversely affect a bank's reported capital. Ho..
Your friend is the owner of a stock which had returns of 25 percent, -36 percent, 1 percent, and 16 percent for the past four years. Your friend thinks the stock may be able to achieve a return of 50 percent or more in a single year. Based on these r..
Develop a financial analysis
Grant purchased one call on XYZ stock at an exercise price of $25. The market price of XYZ stock when Grant purchased the call was $24 a share. XYZ is currently priced at $30 a share. Grant paid $120 to buy the call. How much profit will Grant make i..
The assignment of income doctrine - states that income must be taxed to the entity that renders the service or owns the capital with respect to which the income is paid. The economic substance doctrine - holds that a transaction that changes the taxp..
Consider a 10-year, 12 percent annual coupon bond with a required return of 8 percent. The bond has a face value of $1,000. Which of the following is correct?
MLK, Inc. wants to issue new 15-year bonds for some much-needed expansion projects. The company currently has 6.5 percent coupon bonds on the market that sell for $975.00, make semi annual payments, and mature in 15 years. What coupon rate should the..
Lamar Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 30; and it currently pays after 5 days and takes discounts. Lamar plans to expand, which will require additional financing. Assume 365 days in year for your calculation..
Consider the following policy. A Net Single Premium (NSP) is to pay for a whole life insurance policy to be issued to a person of age x, which provides $10,000 of insurance for the first 20 years, $20,000 of insurance thereafter, plus a return withou..
Big T Burgers and Fries Corp Pays an annual dividend rate of 11.00% on its preferred stock that currently returns 14.74% and has a par value of $100. What is the value of big t burgers and fries corps stock?
Under what circumstances are stocks less risky than bonds?
Define the term constraints and give an example. For a manufacture what product should be made first when resource constraints exist?
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