User Account

All Pages

Calculate the npv of the proposed refunding

Assignment Help Finance Basics
Reference no: EM133002752

Uder Inc. is considering the possibility of refunding its $320 million outstanding bond. This bond has coupon rate of 15% (assume all coupons are paid annually in this question) and will mature in 10 years. To call the old bond, Uder has to pay the par value plus 2 coupons and will issue two new bonds at par: $160 million 8% coupon bond (the lower coupon rate is due to government guarantee) and $160 million 12% coupon bond. The total flotation costs on the new issues are expected to be $3 million. The two new bonds will have to be issued one month before the old bonds are called. The proceeds from the new bonds can be parked in the money market to earn 0.55% per month. The company's tax rate is 25%. Calculate the NPV of the proposed refunding.

Reference no: EM133002752

Questions Cloud

Discuss a possible agency conflict : Discuss a possible agency conflict between inside owners/managers and outside shareholders. What could be done to mitigate this issue?
Calculate annual holding period return : Suppose you purchase a 3-year, 5 percent coupon bond at par and hold it for two years. During that time, the interest rate falls to 4 percent.
Determine abc inc cost of debt : Zip Inc. produces nano-tech equipment. It has a debt-equity ratio of 0.5. The beta of its stock is 1.30. Its bonds pay a semiannual coupon of 9% and have 3.5 ye
Why does the statement managers should maximize shareholder : Why does the statement "managers should maximize shareholder value" equate to activities that maximizes overall social good? What are the critical assumptions
Calculate the npv of the proposed refunding : Uder Inc. is considering the possibility of refunding its $320 million outstanding bond. This bond has coupon rate of 15% (assume all coupons are paid annually
How much of the loss is disallowed by the at-risk rules : How much of the loss is disallowed by the at-risk rules? Howard has a $76,000 loss from an investment in a partnership in which he does not participate.
What is the company cash cycle : Franklin has an inventory turnover of 19.5 times, a payables turnover of 11.5 times, and a receivables turnover of 10.1 times. What is the company's cash cycle?
Determine the payback period of the project : Limon Corporation is considering a project that would require an initial investment of $580,000 and would last for 8 years. Determine the payback period
What can be deducted on final income tax return : What can be deducted on her final income tax return? Chrystal died owning an interest in a passive activity property. The property had an adjusted basis

Reviews

Write a Review

Finance Basics Questions & Answers

  Do you prefer to lease or buy the machine

A firm needs new copy machine. You can purchase a new one for $30000, or you can lease one for three years for a monthly lease payment of $800.

  Explain real rate of interest and inflation? rate

What would you expect the nominal rate of interest to be if the real rate is 4.2?% and the expected inflation rate is ?6.8%?

  Determine average cash balance

Throughout the course of the year, my various projects will require a total amount of cash of $4,000,000. The interest cost for this requirement is 9.75 percent

  What will be the cost of the newly issued common shares

You have advised the firm that flotation costs will be 8% per share. What will be the cost of the newly issued common shares?

  You find that a small business loan in the amount of 50000

you find that a small business loan in the amount of 50000 is the amount you need to purchase the restaurant location.

  What are the ways to reduce payments hor healthcare benefits

If you are hired as a consultant to a major health insurance company or medical service company what are the ways to reduce payments hor healthcare benefits?

  Evaluate volkswagen company csr efforts

Evaluate Volkswagen company CSR efforts. What can the company do to improve its corporate social responsibility behavior and/or reputation?

  The correlations between personal incomes and prices

Elaborate on the correlations between inflation and index prices, and the correlations between personal incomes and prices.

  Explain how much total tax does he pay on the stock sale

How much principal must be invested today for 5 years. during a period when the inflation rate is 2%, if the investor is in the 25% Federal and 4% State tax bracket for ordinary income but taxed at a 15% Federal rate for dividend income, to accumu..

  Read and complete case study 10-10 eat at my restaurant in

read and complete case study 10-10 eat at my restaurant in your text. address the following elements which are also

  What does the cash flow diagram look like for each situation

You start a new job at age 39 with a beginning salary of $72,000 per year paid monthly. What does the cash flow diagram look like for each situation

  Calculate the accounting break-even point

Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure? Explain what your answer tells you about a 500-unit decrease in projected sales.

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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