Answered

Find the information you're looking for at Westonci.ca, the trusted Q&A platform with a community of knowledgeable experts. Get detailed answers to your questions from a community of experts dedicated to providing accurate information. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.

Using the following variables, calculate an organization's cost of debt on a $500,000 bond.Rt: 1% credit-risk rate: 5% t: 15% a. $30,000 b. $25,500 c. $29,550 d. $4,500

Sagot :

Tundexi

Answer:

b. $25,500

Explanation:

$500,000 bond

Rt: 1%

Credit-risk rate: 5%

t: 15%

Cost of debt = 1% + 5%

Cost of debt = 0.01 + 0.05

Cost of debt = 0.06

After tax cost of debt = Cost of debt *(1 - t)

After tax cost of debt = 0.06*(1 - 0.15)

After tax cost of debt = 0.06*0.85

After tax cost of debt = 0.051

Cost of debt = After tax cost of debt * $500,000

Cost of debt = 0.051*(500,000)

Cost of debt = $25,500

So, the organization's cost of debt on the $500,000 bond is $25,500

Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. We're dedicated to helping you find the answers you need at Westonci.ca. Don't hesitate to return for more.