He stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. the beta is 1.25, the yield on a 6-month treasury bill is 3.50%, and the yield on a 20-year treasury bond is 5.50%. the required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. the firm's tax rate is 40%. what is the best estimate of the after-tax cost of debt?

5.14%

Explanation:

Best estimate of the after-tax cost of debt:

(1 - t) × kd is the yield on the bond which is calculated using the PV of annuity formula. So,equating the price & the PVs of coupons & PV of maturity value.

Therefore, the semi-annual (r) = 4.28%

Annual before tax cost of debt = 4.28 × 2

                                                    = 8.56%

So, after tax cost of debt = 8.56% × (1 - 40%)

                                          = 5.14%

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.