Kenny Electric Company's noncallable bonds were issued several years ago and now have 20 years to maturity. These bonds have a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. If the firm's tax rate is 25%, what is the component cost of debt for use in the WACC calculation

6.35%

Explanation:

Let us as a matter of preference determine the pretax cost of debt using the financial calculator approach as set out below:

N=40 (number of semiannual coupons in 20 years=20*2)

PMT=46.25 (semiannual coupon=face value*coupon rate*6/12=$1000*9.25%*6/12=$46.25 )

PV=-1075( current market price)

FV=1000( face value)

Lastly, enter CPT I/Y=4.23% (semiannual yield)

annual yield=pretax cost of debt=4.23% *2=8.46%

The after-tax cost of debt=8.46% *(1-25%)=6.35%

The after-tax cost of debt for use in WACC calculation=6.35%

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.