Jack's Construction Co. has 80 bonds outstanding that are selling at their par value of $1,000 each. Bonds with similar characteristics are yielding a pretax 8.6 percent return. The firm also has 4,000 shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U. S. T-bill is yielding 4 percent, the market risk premium is 8 percent, and the firm's tax rate is 21 percent. Assuming its earnings are sufficient to classify all interest as tax deductible, What is the pre-tax cost of debt

Kandon enterprises, inc., has two operating divisions; one manufactures machinery and the other breeds and sells horses. both divisions are considered separate components as defined by generally accepted accounting principles. the horse division has been unprofitable, and on november 15, 2018, kandon adopted a formal plan to sell the division. the sale was completed on april 30, 2019. at december 31, 2018, the component was considered held for sale. on december 31, 2018, the company’s fiscal year-end, the book value of the assets of the horse division was $415,000. on that date, the fair value of the assets, less costs to sell, was $350,000. the before-tax loss from operations of the division for the year was $290,000. the company’s effective tax rate is 40%. the after-tax income from continuing operations for 2018 was $550,000. required: 1. prepare a partial income statement for 2018 beginning with income from continuing operations. ignore eps disclosures. 2. prepare a partial income statement for 2018 beginning with income from continuing operations. assuming that the estimated net fair value of the horse division’s assets was $700,000, instead of $350,000. ignore eps disclosures.