Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
The Sunbelt Corporation has $30 million of bonds outstanding that were issued at a coupon rate of 10.775 percent seven years ago. Interest rates have fallen to 10.20 percent. Mr. Heath, the Vice-President of Finance, does not expect rates to fall any further. The bonds have 18 years left to maturity, and Mr. Heath would like to refund the bonds with a new issue of equal amount also having 18 years to maturity. The Sunbelt Corporation has a tax rate of 36 percent. The underwriting cost on the old issue was 2.3 percent of the total bond value. The underwriting cost on the new issue will be 1.1 percent of the total bond value. The original bond indenture contained a five-year protection against a call, with a call premium of 7 percent starting in the sixth year and scheduled to decline by one-half percent each year thereafter (consider the bond to be seven years old for purposes of computing the premium). Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Assume the discount rate is equal to the aftertax cost of new debt rounded up to the nearest whole percent (e.g. 4.06 percent should be rounded up to 5 percent).
a. Compute the discount rate. (Do not round intermediate calculations. Input your answer as a percent rounded up to the nearest whole percent.)
Discount rate %
b. Calculate the present value of total outflows. (Do not round intermediate calculations and round your answer to 2 decimal places.)
PV of total outflows $
c. Calculate the present value of total inflows. (Do not round intermediate calculations and round your answer to 2 decimal places.)
PV of total inflows $
d. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
Net present value $
e. Should the Sunbelt Corporation refund the old issue?
Yes
No
what is the premium for growth on the stock?
If interest rate parity holds, what is the yield today on 1-year, risk-free Japanese securities?
Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 5% and IR 6%. A stock with a beta of 1 on IP and 0.5 on IR currently is expected to provide a rate..
You want to purchase a business with the following cash flows: How much would you pay for this business today assuming you need a 14% return to make this deal?
Bubba's Steakhouse has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials, $4,080; hourly labor (variable), $5,200; rent (fixed), $1,590; depreciation, $770; and other fixed costs, $470. Each st..
When reviewing their options for a homeowner’s insurance policy,
Assess the relevant cash flows used in forming a capital budgeting decision model. For this assignment, focus upon a replacement problem. Develop a capital budgeting decision model showing cash flows, cost of capital and decision metrics (i.e., npv, ..
The G hotel sold for 5 Mill. The investors originally paid 3.5 mill for the property 5 yrs ago using a 2.5 mill interest loan. Therefore they had a 2.5 mill balance at the time of the sale and had 600,000 in accumulated depreciation to be recaptured ..
brown ltd operates outdoor amusement centres in a number of country towns. the company has decided to build another
Your company is interested in purchasing an oil well for 8,000,000. It costs 4.00 a barrel to get it to Henry Hub and sell the oil. Your cost of capital is 10%.
Jones Company preferred stock is expected to pay a dividend of $1.75 per share. If your required rate of return is 7%, what is the most that you should be willing to pay for a share of Jones’ preferred stock today? Apple, Inc. just paid a dividend of..
Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans.
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd