TI209 JADMANE BOSourcesTrade and other payablesShort-term borrowingsMortgageLong-term borrowingsShare capitalRetained earningsAmounts$200,000250,000500,000250,000300,000800,000The before-tax bank charges are 11.0% for the short-term borrowings, 10.0% for thelong-term borrowings, and 10.5% on the mortgage. The shareholders expect to earn16%. Assume that the company's income tax rate is 50%. 40%Questionsfinancing1. Calculate the company's after-tax cost of borrowing.2. Calculate the company's weighted average cost of capital.

Weighted Average Cost of Capital is the average cost of capital for all funds employed in the…

Answered: Sources Trade and other payables…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

The Dynamic Group, a private equity firm headquartered in Miami, Florida (US), borrows £5,000,000 for one year at 7.35% interest. What is the dollar cost of this debt if the pound depreciates from $2.0260/E to $1.9310/€ over the year? O 2.32% O2.58% O2.85% O 2.05%
A firm earned $10,000 before interest and taxes, has a 36% tax rate, and has the following debt outstanding: First mortgage bond, 9.0% $ 5,000 Debenture, 10.2% 10,000 Subordinated bond, 12.0% 6,000 Total long-term debt $21,000 The annual coverage of the firm’s debt is
You have been presented with the following information from Bogus Ltd. Source of Capital Book Value Market Value Before-tax cost Long-term debt R11 823 158 R7 389 474 8% Preference shares R118 232 R177 347 13% Ordinary shares R3 103 579 R8 867 368 17% Total R15 044 969 R16 434 189 Assume Bogus Ltd has an average tax rate of 27% Required: a) Calculate the WACC based on the book value weights. Round off answers to two decimal places b) Compare the book value and market value method of calculating the WACC.
Provide Answer with calculation and explanation
ont question Kose, Inc., has a target debt-equity ratio of 1.63. Its WACC is 7.4 percent, and the tax rate is 25 percent. Required: If the company's cost of equity is 15 percent, what is its pretax cost of debt? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 3216.) a. b. If instead you know that the aftertax cost of debt is 5.6 percent, what is the cost of equity? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 3216.)
5. ABC will generate $5 million in debt capital by issuing five thousand $1000 8% per year 10-year bonds. If the effective tax rate of the company is 30% and the bonds are discounted 2%, compute the cost of debt capital (a) before taxes and (b) after taxes from the company perspective. Obtain the answers by hand and spreadsheet.
Question 1. X Ltd has 8% perpetual debt of 20,00,000. The tax applicable to the company is 40%. Determine the cost of capital after tax assuming the debt is issued (i) at par, (ii) at 10% discount, and (iii) at 10% premium.
Buchanan Corporation is refunding $11 million worth of 11% debt. The new bonds will be issued for 8%. The corporation's tax rate is 40%. The call premium is 10%. What is the net cost of the call premium after taxes? Multiple Choice $664, 500 $660, 000 $695,000 $675,000
Buchanan Corporation is refunding $14 million worth of 11% debt. The new bonds will be issued for 8%. The corporation's tax rate is 36%. The call premium is 10%. What is the net cost of the call premium after taxes? Multiple Choice $900,500 $931,000 $911,000 $896,000
Buchanan Corporation is refunding $13 million worth of 11% debt. The new bonds will be issued for 9%. The corporation's tax rate is 31% . The call premium is 10% . What is the net cost of the call premium after taxes? Multiple Choice $901, 500 $932, 000 $912, 000 $897,000
Interest versus dividend expense Michaels Corporation expects earnings before interest and taxes to be $43,000 for the current period. Assuming a flat ordinary tax rate of 21%, compute the firm's earnings after taxes and earnings available for common stockholders (earnings after taxes and preferred stock dividends, if any) under the following conditions: a. The firm pays $12,100 in interest. b. The firm pays $12,100 in preferred stock dividends. a. Complete the fragment of Michaels Corporation's income statement below to compute the firm's earnings after taxes and earnings available for common stockholders under condition (a). (Round to the nearest dollar.) EBIT Less: Interest expense Earnings before taxes Less: Taxes (21%) Earnings after taxes Less: Preferred dividends Earnings available for common stockholders $ LA $ $ $
Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. NIM=Profit/Interest revenue Bank A Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 Given G-bond’s interest rate is 5%, Profit is equal to $4.9 $3.8 $4.0 $2.9 $3.1 $3.3 $20 $10

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