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
Other questions on the subject: Business
Business, 21.06.2019 21:40, fespinoza019
Forecasting as a first step in the team’s decision making, it wants to forecast quarterly demand for each of the two types of containers for years 6 to 8. based on historical trends, demand is expected to continue to grow until year 8, after which it is expected to plateau. julie must select the appropriate forecasting method and estimate the likely forecast error. which method should she choose? why? using the method selected, forecast demand for years 6 to 8.
Answers: 2
Business, 21.06.2019 21:50, sihamabdalla591
Franklin painting company is considering whether to purchase a new spray paint machine that costs $4,800. the machine is expected to save labor, increasing net income by $720 per year. the effective life of the machine is 15 years according to the manufacturer’s estimate. required determine the unadjusted rate of return based on the average cost of the investment.
Answers: 2
Business, 22.06.2019 07:50, kristinaholahan
Budget in this final week, you will develop a proposed budget of $150,000 for the first year of the program and complete the final concept paper for the proposed program due for senior management review. the budget should identify the program's anticipated expenses for the year ahead. budget line items should be consistent with the proposed program and staffing plan. using the readings for the week, the south university online library, and the internet, complete the following tasks: create a proposed budget of $150,000 for the first year of the proposed program including the cost for personnel, supplies, education materials, marketing costs, and so on in a microsoft excel spreadsheet. you may transfer your budget to your report. justify the cost for each item of the proposed budget in a budget narrative.
Answers: 2
Business, 22.06.2019 15:20, sgalvis455
Abank has $132,000 in excess reserves and the required reserve ratio is 11 percent. this means the bank could have in checkable deposit liabilities and in (total) reserves.
Answers: 3
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 in other subjects:
History, 10.07.2019 06:00
History, 10.07.2019 06:00
History, 10.07.2019 06:00
