Jiminy’s Cricket Farm issued a bond with 30 years to maturityand a semiannual coupon rate of 10 percent 4 years ago. The bondcurrently sells for 94 percent of its face value. The company’s taxrate is 35 percent. what is the pretax cost of debt? what is theaftertax cost of debt? Which is more relevant, the pretax or theaftertax cost of debt? Please provide step by step explanation . . .
Your investment horizon is 1 year (i.e. you will need the money1 year from now). Assume you are considering buying a 2-year zerocoupon bond (par value 1000) or a 5-year coupon bond with couponrate 4% paid once a year and par 1000. Assume that the interestrate today is 3%. a. What is the HPR on each of the two bonds if the interest rateafter one year is 4%? b. What is the HPR on each of the two bonds if the interest rateafter one year is 2%? . . .
Your firm is considering purchasing a machine with the followingannual, end-of-year, book investment accounts. The machine generates, on average, $7,900 per year in additionalnet income. What is the average accounting return for this machine? (Donot round intermediate calculations. Enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.) AAR % . . .
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