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How large would the intangible benefits have

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Reference no: EM132572533

Question 1: Suppose XYZ issued a bond currently outstanding that has 25 years left to maturity. The annual interest payment is 9%. The bond is currently selling for $910 per $1,000 bond. What is the before tax cost of debt? What is the after-tax cost of debt if the tax rate is 35%?

Option 1: 8%

Option 2: 10%

Option 3: 9%

Option 4: 7%

Question 2: An engineering firm is considering a drafting machine that would cost $100,000, last four years, provide annual cash savings of $10,000, and considerable intangible benefits each year. How large (in cash terms) would the intangible benefits have to be per year to justify investing in the machine if the discount rate is 14%?

Option 1: $15,000

Option 2: $24,317

Option 3: $90,000

Option 4: $60,000

Reference no: EM132572533

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