Business, 11.03.2020 02:48 ale1910

1. Purple Lemon Fruit Company is considering issuing a new 15-year debt issue that would pay an annual coupon payment of $85. Each bond in the issue would carry a $1,000 par value and would be expected to be sold for a price equal to its par value. Purple Lemons CFO has pointed out that the firm would incur a flotation cost of 1% when initially issuing the bond issue. Remember, the flotation costs will be (A. Added or B. Subtracted) from the proceeds the firm will receive after issuing its new bonds.

The firms marginal federal-plus-state tax is 40%.

Calculate the After-tax cost of debt without flotation cost (A. 4.8450% B.5.1000% C. 4.3350% D. 5.6100%)

Calculate the after-tax cost of debt with flotation cost (A. 4.8450% B. 4.5900% C. 6.1200% D. 5.1728%)

This is the cost of (A. Embedded or B. New) debt, and it is different from the average cost of capital raised in the past.

2. When raising funds by issuing new preferred stock, the company will incur an underwriting, or flotation cost, that (A. Increase or B. Decrease) the cost of preferred stock. Because the flotation cost is usually expressed as a percentage of price of each share, the difference between the cost of preferred stock with and without flotation cost is (A. Insignificant or B. Significant) to not ignore.

Answers: 3

Show answers

Another question on Business

Business, 22.06.2019 01:30

The gomez company, a merchandising firm, has budgeted its activity for december according to the following information: • sales at $500,000, all for cash. • merchandise inventory on november 30 was $250,000. • the cash balance at december 1 was $20,000. • selling and administrative expenses are budgeted at $50,000 for december and are paid for in cash. • budgeted depreciation for december is $30,000. • the planned merchandise inventory on december 31 is $260,000. • the cost of goods sold represents 75% of the selling price. • all purchases are paid for in cash. the budgeted cash disbursements for december are:

Answers: 3

Answer

Business, 22.06.2019 05:00

Every 10 years, the federal government sponsors a national survey of health and health practices (nhanes). one question in the survey asks participants to rate their overall health using a 5-point rating scale. what is the scale of measurement used for this question? ratio ordinal interval nominal

Answers: 1

Answer

Business, 22.06.2019 12:50

Performance bicycle company makes steel and titanium handle bars for bicycles. it requires approximately 1 hour of labor to make one handle bar of either type. during the most recent accounting period, barr company made 7,700 steel bars and 2,300 titanium bars. setup costs amounted to $35,000. one batch of each type of bar was run each month. if a single company-wide overhead rate based on direct labor hours is used to allocate overhead costs to the two products, the amount of setup cost assigned to the steel bars will be:

Answers: 2

Answer

Business, 22.06.2019 21:00

Frost corporation incurred the following transactions during its first year of operations. (assume all transactions involve cash.) 1) acquired $1,900 of capital from the owners. 2) purchased $435 of direct raw materials. 3) used $290 of these direct raw materials in the production process. 4) paid production workers $490 cash. 5) paid $290 for manufacturing overhead (applied and actual overhead are the same). 6) started and completed 250 units of inventory. 7) sold 140 units at a price of $6 each. 8) paid $130 for selling and administrative expenses. the amount of raw material inventory on the balance sheet at the end of the accounting period would be:

Answers: 3

Answer

You know the right answer?

1. Purple Lemon Fruit Company is considering issuing a new 15-year debt issue that would pay an annu...

Questions