Calculate the after-tax cash inflows expected

Assignment Help HR Management
Reference no: EM132820524

Daegu Construction Company Ltd made a Sh.100 million bondage 5 years ago when interest rates were substantially high. The interest rates have now fallen and the firm wishes to retire this old debt and replace it with a new and cheaper one. Given here below are the details about the two bond issues: Old Bonds: The outstanding bonds have a nominal value of Sh.1,000 and 24% coupon interest rate. They were issued 5 years ago with a 15-year maturity. They were initially sold a their nominal value of Sh.1,000 and the firm incurred Sh.390,000 in floatation costs. They are callable at Sh.1,120. New Bonds: The new bonds would have a Sh.1,000 nominal value and a 20% coupon interest rate. They would have a 10-year maturity and could be sold at their par value.

The issuance cost of the new bonds would be Sh.525,000. Assume the firm does not expect to have any overlapping interest and is in the 35% tax bracket

  • Calculate the after-tax cash inflows expected from the an-amortized portion of the old bond's issuance cost.
  • Calculate the annual after-tax cash inflows from the issuance of the new bonds assuming the 10-year amortization.
  • Calculate the after-tax cash outflow from the call premium required to retire the old bonds.
  • Determine the incremental initial cash outlay required to issue the new bonds.
  • Calculate the annual cash-flow savings, if any, expected from the bond refunding.
  • If the firm has a 14% after-tax cost of debt, would you recommend the proposed refunding and reissue? Explain.

Reference no: EM132820524

Questions Cloud

What are three options for interview protocol : What are three options for interview protocol? Analyze pros and cons of each?
Identify an issue in a health care workplace : Identify an issue in a health care workplace that could be resolved by implementing an informatics or technology solution. The issue can be an administrative.
What does an employer owe an employee : An alliance is like a contract. What does an employer owe an employee? What does an employee owe an employer?
What is the value of integrating knowledge and research : Define the cognitive tool and then explain how that tool is used for interdisciplinary integration. What is the value of integrating knowledge and research?
Calculate the after-tax cash inflows expected : Calculate the after-tax cash inflows expected from the an-amortized portion of the old bond's issuance cost.
What amount should be recorded in Vicky capital account : Danny and Vicky are forming a partnership. Danny will invest a truck with a book value of $20,000. What amount should be recorded in Vicky capital account
Identify the most salient legal and ethical facets : For this Discussion, you select a topic that has both legal and ethical implications for PMHNP practice and then perform a literature review on the topic.
Leadership should take in order to avoid challenges : Recommend steps that organizational leadership should take in order to avoid challenges such as this one from happening in the future.
Define two disciplinary assumptions : Define two disciplinary assumptions, theories, or concepts of political science. Define two disciplinary assumptions, theories, or concepts of economics.

Reviews

Write a Review

HR Management Questions & Answers

  Determine the leadership approach being used in the case

Determine the leadership approach being used in the case. Cite specific examples from the case and from scholarship that support your position.

  Responsibility for the compliance department

The organization has a compliance department that is staffed with a director for compliance and several professional staff.  You have a lead role on the compliance team.  The responsibility for the Compliance Department includes, but is not limite..

  How your organization would alleviate some staffing shortage

Design a strategy that describes how your organization would alleviate some staffing shortages, including whether you would hire licensed practical nurses.

  Create a wage and hour standard for the job opportunity

Create a Wage and Hour standard for the job opportunity that you had selected in Assignment 2, and support your standard by using the Fair Labor Standards Act.

  Compute kimm total standard cost per unit

Compute Kimm’s total standard cost per unit.

  What potential solution seems the most feasible for problem

Conclusion - What did you learn? What surprised you? What potential solution seems the most feasible for the problem that you outlined?

  Calculate the fixed cost and variable costs

Calculate the fixed cost, variable costs, and break-even point for the XYZ Corporation for the years 2003 and 2004 listed in Appendix D.

  Optimum production quantity of product

1. What is the optimum production quantity of Product X and Product Y?

  Conduct an inventory analysis of the firm

Evaluate the organization's facilities with regard to capacity and location. Determine whether the organization has enough capacity.

  Concept of organizational effectiveness

Explain the concept of organizational effectiveness, as it relates to the interactions of members. Describe methods used to assess the behaviors and attitudes of organizational members, and apply 1 model in an analysis of your organization.

  Assurance capability of the vendors

Identifying technical, financial, managerial and quality assurance capability of the vendors and thereby generate data to serve basis for preliminary source selection is :-

  Systems planning for a small firm

You are in charge of systems planning for a small firm. Create and name an imaginary company and discuss what questions you would ask or the considerations to be taken by the company officers

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd