Brief Exercise 9-60 Cost of Debt Financing Crackle Company instituted an aggressive plan to lower its...
Brief Exercise 9-60
Cost of Debt Financing
Crackle Company instituted an aggressive plan to lower its cost of financing over the next decade. Currently Crackle's cost of debt financing is 8%, its cost of equity financing is 14%, and its tax rate is 35%. Crackle currently has $2,500,000 of debt.
Required:
Calculate the after-tax cost amount of interest expense.
Homework Answers
Cost of debt before tax -8%
Tax rate -35%
Cost of debt after tax -5.2%(8*0.65)
Debt -$25,00,000
Interest expense-$130000($2500000*5.2%)
Therefore after tax amount of interest expense =$130000
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Brief Exercise 9-60
Cost of Debt Financing
Crackle Company instituted an aggressive plan to lower its...
Exercise 10-1 Debt versus equity financing LO A1 No-Toxic-Toys currently has $200,000 of equity and is...
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Exercise 10-1 Debt versus equity financing LO A1 No-Toxic-Toys currently has $400,000 of equity and is...
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Exercise 10-1 Debt versus equity financing LO A1 No-Toxic-Toys currently has $500,000 of equity and is...
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QUESTION 3 Salma Limited finances its operations 40% debt and 60% equity. The company cost of...
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Brief Exercise 20-11 Bridgeport Corporation has the following information available concerning its postretirement benefit plan for...
Brief Exercise 20-11
Bridgeport Corporation has the following information available
concerning its postretirement benefit plan for 2017.
Service cost
$41,100
Interest cost
48,600
Actual and expected return on plan assets
25,400
Compute Bridgeport’s 2017 postretirement expense.
Postretirement expense 2017
$
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Compton Corporation currently has no debt in its capital structure. As an unlevered firm, its cost...
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Exercise 10-1 Debt versus equity financing LO A1 No-Toxic-Toys currently has $200,000 of equity and is planning an $80,000 expansion to meet increasing demand for its product. The company currently earns $70,000 in net income, and the expansion will yield $35,000 in additional income before any interest expense. The company has three options: (1) do not expand, (2) expand and issue $80,000 in debt that requires payments of 11% annual interest, or (3) expand and raise $80,000 from equity financing....
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Brief Exercise 20-11
Bridgeport Corporation has the following information available
concerning its postretirement benefit plan for 2017.
Service cost
$41,100
Interest cost
48,600
Actual and expected return on plan assets
25,400
Compute Bridgeport’s 2017 postretirement expense.
Postretirement expense 2017
$
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