Question
The following information is available for three companies: Rope Co. Chain Co. Line Co. Face value of bonds payable $ 322,000 $ 788,000 $ 603,000
The following information is available for three companies:
| Rope Co. | Chain Co. | Line Co. | |||||||
| Face value of bonds payable | $ | 322,000 | $ | 788,000 | $ | 603,000 | |||
| Interest rate | 5 | % | 4 | % | 3 | % | |||
| Income tax rate | 35 | % | 20 | % | 25 | % | |||
a. Determine the annual before-tax interest cost for each company in dollars. (Before-Tax Interest Cost)
Rope Co. _____
Chain Co. ____
Line Co. _____
b. Determine the annual after-tax interest cost for each company in dollars. (Round your answers to the nearest dollar amount.) (After-Tax Interest Cost)
Rope Co. _____
Chain Co. ____
Line Co. _____
c. Determine the annual after-tax interest cost for each company as a percentage of the face value of the bonds. (Round your answers to 1 decimal place.)
(After-Tax Interest Cost)
Rope Co. _____ %
Chain Co. ____ %
Line Co. _____ %
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Managerial Accounting
Authors: John J. Wild, Ken W. Shaw
2010 Edition
9789813155497, 73379581, 9813155493, 978-0073379586
