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Bond Yield and After-Tax Cost of Debt
A company's 7% coupon rate, semiannual payment, $1,000 par value bond that matures in 25 years sells at a price of $733.23. The company's federal-plus-state tax rate is 30%. 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.
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She has negotiated a sales price of $35,000 and she has a $5,000 down payment. She is eligible for the full $8,000 cash rebate. Her bank has pre-approved her for a 5 year car loan at 8%. Assuming Alejandra wants the cheapest overall price, which opti..
Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $24,000 to $54,000 per year. The new machine will cost $85,000, and it will have an estim..
If the discount rate is 6 percent, what is the future value of these cash flows in Year 4? What is the future value at an interest rate of 14 percent? What is the future value at an interest rate of 21 percent?
Sean needs to record journal entries for various inventory purchases on account and subsequent payments. Record the journal entries using both the gross and net methods.
Identify what the expected return of stock should be for each of the following scenarios. Assume that risk free is 8% and expected return of market is 10%:
Consider the auction of 2-year Floating Rate Notes in April 2014. As we saw in class, the notes are priced at par and investors receive face value at maturity. Coupon interest payments are indexed to the 13-week T-bill and are made quarterly (July, O..
Suppose that stock L sells for $50 today and is expected to pay a dividend of $3.00 at the end of one year. Firm L's beta is 1.20, the market expected return is 10%, and the riskless return is 3%. Using the CAPM and an assumption about market equilib..
Two weeks ago, you signed an employment contract and accepted the responsibility of a Branch Manager with the First Econ Bank in Arlington, TX. Please calculate the actual dollar amount the First ECON Bank has to place aside to meet legal Reserve Req..
You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $2.75 a share at the end of the year (D1 = $2.75) has a beta of 0.9. The risk-free rate is 5.9%, and the market risk premium is 5.5%. Keller currently se..
Investors should expect to be compensated for bearing ____ risk, but they should not expect to be compensated for bearing ____ risk.
You have just purchased a home and taken out a $490,000 mortgage. The mortgage has a 30-year term with monthly payments and an APR of 4.88%. How much will you pay in interest and how much will you pay in principal during the first year? How much will..
Marie and Bob Houmas purchased 208 shares of General Electric stock for $24 a share. One year later, they sold the stock for $31 a share. They paid their broker a $132 commission when they purchased the stock and a $154 commission when they sold it. ..
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