Calculate the semiannual after-tax savings

Assignment Help Business Economics
Reference no: EM132408735

RST, Inc. has a $50 million debt issue outstanding that bears a 15% coupon (7.5% semiannual). It matures in a lump sum at the end of 10 years. The call price is $1,100 per bond. A new 10-year debt issue would require a 12.5% coupon (6.25% semiannual). The firm's marginal income tax rate is 40%.

a. Calculate the semiannual after-tax savings that would result if the firm issued $50 mil lion of 12.5% debt.

b. Calculate the net advantage of refunding the 15% debt issue.

Reference no: EM132408735

Questions Cloud

Implement authentication and authorization : Design, implement and test a solution based on the given requirements and Use server-side scripting language PHP to implement a database-driven solution
What is the coefficient of variation for panda : Panda INC. stock has an expected return of 9% and a standard deviation of 12%. What is the coefficient of variation for Panda?
Calculate the effective annual rates for loan : Calculate the effective annual rates for each loan, and indicate which loan offers the better terms.
Which sinking-fund amounts should the firm call : Its new issue rate is 8% for 10-year debt, 8.5% for 11-year debt, and 9% for 12-year debt. Its marginal income tax rate is 40%.
Calculate the semiannual after-tax savings : a. Calculate the semiannual after-tax savings that would result if the firm issued $50 mil lion of 12.5% debt.
Calculate the operating cycle based on information : Calculate the operating cycle based on the following information: Sales = $60,812, COGS = $30,940, Inventory = $8,264, Accounts Receivable = $19,706
What do the dupont equations from 2018 : What do the DuPont equations from 2018 tell us about Williams Company compared to Blumer Co?
What is the expected return on overall stock market : Assume that the risk-free rate of return is 5 percent and the market risk premium is 6 percent. What is the expected return on the overall stock market?
Security valuation equity : Next year, a company expects net income of $44 million. It pays 50% of its earnings out in dividends and has a cost of equity capital of 11%.

Reviews

Write a Review

Business Economics Questions & Answers

  What does the current account measure

What does the current account measure? What about the financial/capital account? Assume America exports $25,000 of corn to Japan.

  Describes the Sarbanes-Oxley Act

Identify the statement that accurately describes the Sarbanes-Oxley Act. ?

  Place to prevent discrimination

What are some interventions organizations can put in place to prevent discrimination?

  The budget constraint

Suppose a person has $8 to spend only on apples and bananas. Apples cost $.04 each and bananas cost $.01 each. Furthermore, his preferences for apples (A) and bananas (B) can be represented by U = the square root of AB. Give the budget constraint, wh..

  Operating increases and decreases

What are some budget benefits that might come from both emergent threat priority and Salary and operating increases and decreases?

  The two extreme examples of market structures

Which of the following pairs illustrates the two extreme examples of market structures? Why?

  Possibility curve be downward sloping

Why do points on a utility possibility curve represent efficient allocations of resources? Why must the utility possibility curve be downward sloping

  Frontier for the production of hamburgers

Draw a Production Possibility Frontier for the production of hamburgers and milkshakes at a hamburger restaurant.

  Labor between sectors and of output of the two goods

Developia produces two goods, manufactures and food, using three factors of production: capital, land and labor. The production of manufactures requires capital and labor, while the production of food uses land and labor. What is the effect on the al..

  Class action cases and corporate liability cases

What are your thoughts on tort reform, more specifically setting caps/limits (ceilings) on jury awards/verdicts in tort liability cases. Class action cases? Corporate liability cases? Is this a good idea? Who would lobby for these caps? Who DOES lobb..

  About how to fix automobiles than their costumers do

Mechanics usually have better information about how to fix automobiles than their costumers do. What problems does this advantage create? Do mechanics or their customers do anything to limit these problems?

  Central predictions of the median voter theorem

Should any of the assumptions that give rise to that theorem be modified in order to make it more realistic?

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