Component cost of debt for use in wacc calculation

Assignment Help Financial Management
Reference no: EM131347204

Several years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $875, and the company’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. 4.58%

b. 4.92%

c. 5.87%

d. 3.78%

e. 4.97%

Reference no: EM131347204

Questions Cloud

Determine whether more people prefer coke or pepsi : Determine whether more people prefer Coke or Pepsi. Assume that roughly half the population prefers Coke and half prefers Pepsi. How large a sample do you need to take to ensure that you can estimate, with 95% confidence, the proportion of people ..
How would-do you handle this situation as parents : Peers exert a powerful influence on children's self-esteem. During the school years, children begin to compare themselves with their peers when evaluating their competencies. Children also have very specific dress and behavioral codes that contrib..
What are cimarron state total risk-weighted assets : Cimarron State Bank reports the following items on its balance sheet: cash = $200 million; U.S. government securities = $150 million; residential real estate loans = $300 million; and corporate loans = $350 million. What are Cimarron State’s total ri..
Describe the dialectical behavior therapy : My portion of this team assignment is the following highlighted in red: Our subject is Dialectical Behavior Therapy (DBT) which is a treatment used for personality disorder. This is a debate transcript, There are 6 people parts in my team.
Component cost of debt for use in wacc calculation : Several years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $875, and the company’s tax rate is 40%. What is the com..
Would you use hypothesis testing : Is this enough evidence to persuade Callaway to enter the golf ball market - How would you make the decision if you were Callaway management? Would you use hypothesis testing?
Cash balances as result of implementing lockbox system : It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter’s management is considering a lockbox system to reduce the firm’s collection times. What is the reduction in outstanding cash balan..
Data analysis and decision making : Provide an example of when you might want to take a cluster random sample instead of a simple random sample, and explain what the advantages of a cluster sample might be. Also, explain how you would choose the cluster sample.
Discuss why the case is important to mental health clinician : Discuss why the case is important to mental health clinicians.Describe the violence risk assessment instruments a clinician might use to meet the requirements provided for in Tarasoff.Discuss if a clinician should be held civilly liable for violent b..

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the corrected operating income

TeleMedia is a technology firm that reported an operating loss of $15 million in the most recent year (just ended), after R&D expenses of $100 million. If R&D has a 3-­-year life and the company’s R&D expenses in the last three years have been $30 mi..

  Expected earnings stream for sprint

The expected earnings stream for Sprint for the next three years is expected to be $40,000, $50,000, and $50,000 respectively (assume the firm falls off the face of the earth in three years as we did in class). Meanwhile, interest rates are expected ..

  What is cash conversion cycle

Parramore Corp has $12 million of sales, $1 million of inventories, $3 million of receivables, and $2 million of payables. Its cost of goods sold is 75% of sales, and it finances working capital with bank loans at an 8% rate. What is Parramore's cash..

  Critiques the short-term finance policy

Write a one page memo that critiques the short-term finance policy of each company and explain which company has the better short-term finance policy. Justify your response.

  What was the firms cash flow due to financing activities

During the last year, Globo-Chem Co. generated $1170 million in cash flow from operating activities, and had negative cash flow generated from investing activities (-$640 million). At the end of the second year, Globo Chem Co. had $200 million in cas..

  The amount of money that would be in the account

The amount of money that would be in the account if you left the money there until your 65th birthday is closest to:

  What is effective gross income

An office building is valued at $1,000,000 when net income is capitalized at a rate of 12 percent. If total operating expenses are 40 percent of effective gross income, what is effective gross income? The cost of constructing a building today with th..

  Calculate the cost of common equity financing

Paul Sharp is CFO of Fast Rocket Inc. He tries to determine the cost of equity financing for his company. The stock has a beta of 2.27. Paul estimated that the market return is 9.78%. The current rate for 10-year Treasury Bonds is 4.85%. Calculate th..

  Zero tax rate due to tax loss carry-forwards

Northern Iowa Clearing Service Inc. is considering a new machine purchase. It will cost $5,000,000. The company has a zero tax rate due to tax loss carry-forwards, and is considering a 4-year, bank loan to finance the equipment. The loan has an inter..

  Calculate the tax on the sale of each asset

Capital gains taxes Perkins Manufacturing is considering the sale of two nondepreciable assets, X and Y. Asset X was purchased for $2,000 and will be sold today for $2,250. Asset Y was purchased for $30,000 and will be sold today for $35,000. The fir..

  About the monthly payment

You are interested in purchasing a new automobile that costs $35,000. The dealership offers you a special financing rate of 6% APR (0.5%) per month for 48 months. Assuming that you do not make a down payment on the auto and you take the dealer's fina..

  How much should he be willing to pay for the stock

Ken Investor expected the Widget Corporation to pay dividends of $4, $4.5, and $5 over the next three years. He also expects that the stock will have a price at the end of a three- year holding period of $250 per share. If Ken requires a 20% return o..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd