Edwards Electronics Recently Reported $11,250 of Sales,$5,500 of Operating Costs

question 56

Multiple Choice

Edwards Electronics recently reported $11,250 of sales,$5,500 of operating costs other than depreciation,and $1,250 of depreciation.The company had no amortization charges,it had $3,500 of bonds that carry a 6.25% interest rate,and its federal-plus-state income tax rate was 35%.How much was its net cash flow?

• A) $3,284.75
• B) $3,457.63
• C) $3,639.61
• D) $3,831.17
• E) $4,032.81

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Definitions:

Call Provision

A clause in a bond or other fixed-income security that allows the issuer to repurchase and retire the debt before its maturity date.

Coupon Rate

The interest rate stated on a bond, which is the percentage of the bond's face value that is paid out annually as interest to the bondholder.

Yield to Maturity

The total return anticipated on a bond if held until it matures, including all coupon payments and the return of the principal amount.

Coupon Rate

The interest rate stated on a bond when issued, which represents the amount of interest the bondholder receives, typically paid annually or semi-annually.