Calculate the npv of the proposed refunding

Assignment Help Finance Basics
Reference no: EM133061495

Five years ago, Sportify Inc. issued a 20-year bond with an annual coupon rate of 12% to finance its $60 million oversea expansion (assume coupons are paid annually in this question). Because of the decreasing interest rates, it is considering the possibility of replacing it by a new 7% bond.

To call the old bond, Sportify must pay the par value plus 3 annual coupons. The total flotation costs on the new issues are expected to be $1 million. The new bond will have to be issued one month before the old bond is called. During the overlap period, the proceeds from the new bond will earn 0.4% per month. The company's tax rate is 20%.

Calculate the NPV of the proposed refunding.

Reference no: EM133061495

Questions Cloud

How social responsibility and public interest intersect : Describe how social responsibility and public interest intersect. Explain why it is essential for you, in role, to conduct yourself in legal and ethical manner.
What are the five cs of credit : 1. What are the five Cs of credit? Discuss their importance in credit analysis. Describe the five Cs of bad credit introduced in the text
Determine the material price variance : Determine the material price variance and the material quantity variance for March. Indicate whether each variance is favorable or unfavorable
Determining the expansion projects : BDJ Co. wants to issue new 21-year bonds for some much-needed expansion projects. The company currently has 9.6 percent coupon bonds on the market that sell for
Calculate the npv of the proposed refunding : Five years ago, Sportify Inc. issued a 20-year bond with an annual coupon rate of 12% to finance its $60 million oversea expansion (assume coupons are paid annu
Present value of the maintenance : Show all work.The answer must include PAINFG P = Present value (this value is not used in this problem)
Prepare an income statement based on variable costing : Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows: Prepare an income statement based on variable costing
Talk about the risks of offshore outsourcing : A close examination of the term "spaces of destruction" as it is used in Fischbacher-Smith (2011) and Fischbacher-Smith and Smith (2015).
Explain the motives behind the credit ratings agencies : "The "Big Three" global credit rating agencies-U.S.-based Standard and Poor's (S&P), Moody's, and Fitch Ratings-have come under intense scrutiny in the wake of

Reviews

Write a Review

Finance Basics Questions & Answers

  Prepare fully classified income statement and balance sheet

MPA702 Financial Interpretation - deakin business school - Prepare the fully classified Income Statement and Balance Sheet for July 2019 for Muse Consulting

  Compute the cash collections from sales

The accounts receivable balance at the end of the previous quarter was $97,000 ($71,000 of which was uncollected December sales).

  Invest in equal annual amounts and alternatively

calculate the amount of money he would have to invest in equal annual amounts and alternatively, in equal monthly amounts starting at the end of the current.

  How forward contracts work in markets

Make your own assumption for prices, apply the forward contract equation and do not forget to comment.

  Supported the tree clearing laws

A public opinion survey wished to determine if support for new tree clearing laws differed between metropolitan (M) and regional (R) areas. Of the 625 metropolitan households interviewed, 460 indicated they supported the tree clearing laws

  Determine the firm optimal cash position

Assuming an annual opportunity cost of 2.5%, a fixed cost per securities transaction of $10, and total annual cash needs for the year of $200,000.

  Demand in an exposure period

How will the new retail store meet demand in an exposure period?

  What is the connection of herd behavior

What is the connection of Herd Behavior with the anomaly January effect

  Calculate the minimum interest rate

You have a choice between receiving $450 now or $470 in six months' time. Current interest rates are 10% p.a. (simple interest).

  What is the expected growth rate for the dividends

What is the expected growth rate for the dividends? Your answer should be in percentage form and should be accurate to three decimal places

  Yur firm has total assets of 4900 fixed assets of 3200

your firm has total assets of 4900 fixed assets of 3200 long-term debt of 2900 and short-term debt of 1400. what is

  Discuss the merits and limitations of consultancys ability

The firm says that it does this by statistically analyzing the words and phrases in the company's annual reports, news releases and public speeches by the company's senior executives.

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