Suppose a firm reports $16,500 of sales, $9,250 of operating costs other than de

Question

Suppose a firm reports $16,500 of sales, $9,250 of operating costs other than depreciation, and $1,750 of depreciation. It had $10,000 of bonds outstanding that carry a 8.0% interest rate, and its federal-plus-state income tax rate was 40%. How much was the firm's earnings before taxes (EBT)? $4,600 $4,700 $5,200 $5,300 $5,500 What is the value of a 20-year, noncallable bond with an annual coupon rate of 9.5%, but making semiannual interest payments? The bond has a face value of $1,000, and you require an annual 8.4% discount rate for this investment: $1,105.69 $1,133.34 $1,161.67 $1,190.71 $1,220.48

Explanation / Answer

17. EBT = 16500-9250-1750 =$ 5500

$ 5500

18.value of bond = 47.5*(1-1.042^-40)/0.042 + 1000/1.042^40 = $ 1105.69

$ 1105.69

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