What is the bond refunding npv

Assignment Help Finance Basics
Reference no: EM13515223

Bob Technologies is considering whether or not to refund a $70 million, 10% coupon, 30-year bond issue that was sold 5 years ago. It is amortizing $4 million of flotation costs on the 10% bends over the issue's 30-year life. Bob's investment banks have indicated that the company could see a new 25-year issue at an interest rate of 8% in today's market. Neither they nor Bob's management anticipated that interest rates will fall below 8% any time soon, but there is a chance that rates will increase. A call premium of 10% would be required to retire the old bonds, and flotation cots on the new issue would amount to $5 million. Bob's marginal federal plus-state tax rate is 40%. Conduct a complete bind refunding analysis. What is the bond refunding's NPV? Should they refund the bonds?

Reference no: EM13515223

Questions Cloud

What are exogamous and endogamous groups : What are exogamous and endogamous groups, and what is an example of each of these in your own social setting?
Should neandertals be included as a subspecies of humans : Should neandertals be included as a subspecies of humans, or its own species? What is the evidence for and against this? Can someone please help me to figure this out?
Difference between problem-oriented research-pure research : What is the difference between problem-oriented research, pure research, and laboratory research?
Terms of the course of their pregnancies : What are some common problems faced by pregnant women in developing countries (in terms of the course of their pregnancies)?
What is the bond refunding npv : What is the bond refunding's NPV? Should they refund the bonds?
What do forensic anthropologists do : What do forensic anthropologists do? How do they apply anthropological methods to their work?
Wong industries has hired the investment banking firm : Wong industries has hired the investment banking firm
Plays a role in freuds analysis of religion : This plays a role in Freud's analysis of religion. Freud's theory relies, in part, on this theory
What will be the nominal annual percentage cost : a)What will be the nominal annual percentage cost of its non-free credit if it pays 60 days after the purchase? (Assume a 365-day year.)

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the most you would pay for city food common stock

They expect to see their dividend grow at a twenty percent rate for the next two years and then level out at a continuous six percent growth rate. City Food's required rate of return is twelve percent. What is the most you would pay for City Foods..

  Assess a corporations financial performance

Determine why are financial ratios used to assess a corporation's financial performance? Why are sales reports, profits, debts, or current liability reports insufficient?

  What is the most harley should be willing to pay

The Anderson Pipe Co. just paid an annual dividend of $3.75 and is expected to grow at 8% for the forseeable future. Harley Bevins generally demands a return of 9% when he invests in companies similar to Anderson.

  Differentiate between direct and indirect costs of

answers the two following questions with a minumim of 20 words1if you were an investment banker how would you determine

  Risk proposal for investment

Your corporation has an opportunity to make the major investment in China of $100 million to make offshore manufacturing facility.

  Calculate the debt ratio under both alternatives

The company is considering two alternatives to raise the $2 million: (1) sell common stock at $10 per share, or (2) Sell bonds at a 10 percent coupon, each $1,000 bond carrying 50 warrants to buy common stock at $15 per share.

  What was the price of this bond when it was issued

Suppose you purchase a 10-year bond with 6% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond’s yield to maturity was 5% when you purchased and sold the bond

  Some analysts in the agency argue that the annual real

the environmental protection agency of a county would like to preserve a piece of land as a wilderness area. the

  Calculate break even and current eps

Romeo & Juliette are competitors in selling college finance textbooks. The separate capital structures of each corporation are as follows:

  Calculating real rate using nominal rate and inflation rate

Assume nominal rate is 14.62% and inflation rate is 5.49%. Solve for the real rate.

  Similarities as well as differences between the goal

Similarities as well as Differences between the goal in throughput costing and Activity Based costing

  This week i want you to find the statement of cash flow for

this week we are studying the statement of cash flows.nbsp operating cash flow represents the cash that flows in and

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