Again, note that the actual state rate is reduced by 25% to allow for the deductibility of state income taxes on the federal income tax return. If Dana’s state tax rate increases to 10%, corporate bonds are still superior to Treasury bonds. 50. [LO 1] At the beginning of his current tax year David invests $12,000 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 10 years. David receives $700 in interest ($350 every six months) from the Treasury bonds during the current
Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are currently priced at $746.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 35%? Assume that your calculation is made as on Wall Street. 8. RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent.
On January 1, 2010, Roberto Company adopts a compensatory stock option plan and grants 40 executives 1,000 shares each at $30 a share. The fair value per option is $7 on the grant date. The company estimates that its annual employee turnover rate during the service period of three years will be 4%. However, at the end of 2011, the company estimates that the employee turnover will be 5% a year for the entire service period. The compensation expense for 2011 will be (Round off turnover calculations to three decimal places and answer to the nearest dollar.)
| Math 103 Final Project – Parts 1, 2, and 3 | | | Math 103 Instructor: Toni Robertson December 11, 2010 Math 103 Instructor: Toni Robertson December 11, 2010 Part 1: 1a. What is the shortest loan (36 months, 48 months, 60 months or 72 months) that has a monthly payment within your $500 budget that will allow you to buy the $15,000 car? Answer: Through Bank of America, I found a rate of 2.99% for the 36, 48 and 60 month loans. We are able to put down 20% and will need to finance $12,000. The shortest loan period for the $15,000 car that would be under our $500 limit is the 36 month loan at a rate of $348.93 per month.
The corporate tax rate is 40, percent. 2. All of the following terms would apply to any new capital offerings: a. Debt: The firm has an 8.5% semi-annual coupon rate bond that has 12 years left to maturity which currently sells for $1,015.00. b.
Assume there are 365 days in a year. $20,000/365= 54.79 54.79 x 20 = $1,095.80 3-2 Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Equity ratio = 1/2.5 = .40 Debt ratio + equity ratio = 1 1-equity ratio = debt ratio 1-.40 = .60 or 60% 3-3 Winston Washers’s stock price is $75 per share.
The Days Sales Outstanding: Receivable / Average sales per day DSO= 20 days, Average daily sales = $20,000 Receivable 20 days= 20,000 Receivable = 20 x 20,000 = $400,000 Problem 3-2: Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Debt Ratio: Total liabilities / Total assets Problem 3-3: Winston Washers’s stock price is $75 per share. Winston has $10 billion in total as- sets.
What amount should Ruiz record on March 1, 2010 as paid-in capital from stock warrants? (Points : 4) $28,800 $33,600 $41,600 $40,000 3. (TCO A) On January 1, 2010, Trent Company granted Dick Williams, an employee, an option to buy 100 shares of Trent Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $900. Williams exercised his option on September 1, 2010, and sold his 100 shares on December 1, 2010.
Delta incurs a marginal corporate tax rate of 30%. • 20 year Treasury risk free rate is currently about 3.64%. The historical (1926-2008) difference in yield between 20-year government bonds and T-bills is around 2.3%. Subtract 2.3% from the 20-year rate to find the equivalent average one-year interest rate today. The one-year risk free interest rate is 1.34%.
Her calculations gave a WACC of 8.4%. Assumptions * To determine the risk-free rate, current yield of 5.74% on 20 year U.S. Treasuries was used. This was chosen as 20 year period is closest data available to the period under study which is 25 years (1996 to 2001) * For Equity Risk Premium geometric mean was used which gave risk premium of 5.90%. This was selected because geometric mean is a better indicator than average mean for longer life valuations * For calculating Beta, average value of historic beta was used * Current portion of long-term debt was not used to calculate cost of debt. This was because the ratio of this as a portion of total debt raised is very less, especially as compared to notes payable and long-term debt * For calculating Cost of Capital, WACC method was used instead of Dividend Discount Model as DDM requires substantial dividend payout by the company which Nike does not Calculating Cost of Capital Debt as a proportion of total capital makes up 10.15% and equity is 89.95%.