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Five years ago, NorthWest Water (NWW) issued $50,000,000 face value of 30-year bonds carrying a 14% (annual payment) coupon. NWW is now considering refunding these bonds. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual interest rate of 11.67% in today's market. A call premium of 14% would be required to retire the old bonds, and flotation costs on the new issue would amount to $3 million. NWW's marginal tax rate is 40%. The new bonds would be issued when the old bonds are called. a. What is the required after-tax refunding investment outlay, i.e., the cash outlay at the time of the refunding? b.What will the after-tax annual interest savings for NWW be if the refunding takes place?
The value of a share is equal to the present value of all future earnings (EPS). All else equal, if stock A's dividends grow at a higher rate than stock B's dividends, A is valued higher than B. P/E ratio is also called earnings multiple because P = ..
The estimated market risk premium under the Capital Asset Pricing Model is 11 percent and the risk free rate of return is 3.2 percent.
Among a company’s assets and accounting records, an actuary finds a 10-year bond that was purchased at a premium. What is the value of the premium?
MBM estimates its expansion cost at $18.63 million and wants to fully fund upfront. Management has decided to save $1.1 million a quarter for this purpose. The firm earns 6.25 percent, compounded quarterly, on its savings. How long does the firm have..
Two specific, real-world examples of asset-backed securities with appropriate maturities and how they compare to a Treasury security of the same maturity in terms of the spread over the Treasury yield
Why do the soft technologies open more opportunities for women? To what extent have these technologies impacted the perceptions of men’s and women’s roles in the economy, within marriage, and in society as a whole?
Universal Laser, Inc. just paid a dividend of $2.65 on its stock. The growth rate in dividends is expected to be a constant 4% per year indefinitely.
A stockbroker has proposed two investments in lowrated corporate bonds paying high interest rates and selling at steep discounts (junk bonds). The bonds are rated as equally risky and both mature in 15 years. Construct a choice table for interest rat..
What is Crew Cut's operating cash flow, investment in operating capital and free cash flow for 2008, respectively in millions?
Can someone help me find the following: Net income available to common stockholders and Common stockholders’ equity? Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 year..
Suppose that a zero coupon bond selling at $ 1,000 par has a duration of four years. If interest rates increase from 6 percent to 7 percent annually, the value of the bond will fall by what amount using Equation 6.14? Use semiannual compounding. Then..
Which of the following statements concerning stock bonus plans and ESOPs is(are) true? They both give employees a stake in the company through stock ownership and allow taxes to be delayed on stock appreciation gains.
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