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In-The-Dell Farm issued a 30-year, 8 percent semiannual bond 7 years ago. The bond currently sells for 108 percent of its face value. The company’s tax rate is 35 percent.
a. What is the pretax cost of debt?
b. What is the aftertax cost of debt?
c. Which is more relevant, the pretax or the aftertax cost of debt? Why?
An employee contributes 9 percent of his salary to his 401(k) plan and the employer matches with 40 percent of the first 6 percent of the employee's salary. The employee earns $90,000 and is in a 28 percent tax bracket. If the employee earns 10 perce..
U.S. Treasuries are never subject to interest rate risk unless we select a maturity equal to our investment horizon. Many practitioners analyze other financial characteristics of a firm, when they forecast betas. When using historical returns to fore..
After developing a prospect base, targets are screened (or organized) for contact prioritization. Which of the following can be used for screening criteria? All of the following statements are true about Letters of Intent, except for: The final price..
Your firm wants to lease a $500,000 piece of equipment. The equipment has a 5-year life and a salvage value of $100,000 at the end of year 5.Depreciation is straight-line over 5 years to a zero book value. There will be 5 pre-paid lease payments on t..
You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 16 percent, –16 percent, 18 percent, 28 percent, and 10 percent. a. What was the arithmetic average return on Crash-n-Burn’s stock over this five-year pe..
Teaser Rate Mortgage A mortgage broker is offering a 30-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 6.5 percent APR interest rate. After the second year, the mortgage interes..
Comment on this design. Identify biases, concerns, and why you might question any results. Suggest an improved design. Be sure to specify your design completely; include a diagram if appropriate; discuss how you would implement your study.
A company has total book value of common stock equal to $850,000, a par value of $3 per share, 50,000 shares issued and outstanding, and the market value of the common stock is $80 a share. What is the company's market capitalization?
Describe the effect of the errors on the income statement and balance sheet and is this company profitable? How do you determine whether or not this is the case
ABC Corporation has issued callable bonds that have 8% annual coupon rate paid semianmally. Bonds could be redeemed starting from the end of year 2. The call premium equals the amount of the annual coupon. The bonds mature in 8 years, have a face val..
Lindsay hawkes sells discs that contain 25 software packages that perform a variety of financial functions typically used by business students. Depending on th quantity ordered, Lindsay offers the following price discounts order quantity PRICE. The a..
The interest factor (IF) for the future value of an ordinary annuity is 4.641 at 10% for four years. If we wish to accumulate $8,000 by the end of four years, how much should the annual payments be?
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