Which appears to be more attractive in terms of reacquiring

Reference no: EM13299379

XYZ Company is in awe at the recent change in interest rates. The current interest rate on A2 rated bonds is currently at 6 percent. The $30 million, 15-year bond issue that the company has outstanding was initially issued at 9 percent five years ago.

XYZ is considering refunding the bond issue due to this decline. The old issue had a call premium of 8 percent. The underwriting cost on the old issue had been 3 percent of par and on the new issue it would be 5 percent of par. The tax rate would be 30 percent and a 4 percent discount rate would be applied for the refunding decision. The new bond would have a 10-year life.

A. Compute the price of the old bonds in the open market using annual analysis. Determine the price for a single $1,000 par value bond.

B. Compare the price in part A to the 8 percent call premium over par value. Which appears to be more attractive in terms of reacquiring the old bonds?

Reference no: EM13299379

Questions Cloud

Compute the peak voltage across the capacitor : An AC generator supplies an rms voltage of 120 V at 60.0 Hz. It is connected in series with a 0.350 H inductor, a 5.00 ?F capacitor, What is the peak voltage across the capacitor

Explain analyze the groups bonded to the carbon of interest : Analyze the groups bonded to the carbon of interest. Every H contributes +1, and every oxygen contributes -2. An -OH group contributes (-2 + 1 = -1). Ignore carbons bonded to the carbon of interest. The sum of the oxidation states must be zero, si..

Create an equivalent synthetic position using stocks : Given the prices below, is it more profitable to borrow money directly or to create an equivalent synthetic position using stocks and stock index futures? Use tables showing the payoffs to compare the two.

What is the expected annual divivdend growth rate : If the stock is selling for $50 today and the required return is 15, what is the expected annual divivdend growth rate after year two?

Which appears to be more attractive in terms of reacquiring : Compare the price in part A to the 8 percent call premium over par value. Which appears to be more attractive in terms of reacquiring the old bonds?

Evaluate the percent of each compound in the sample : 0.2356 g sample containing only NaCl and BaCl2 yielded 0.4637g of dried AgCl. Calculate the percent of each compound in the sample.

Determine the station where tangent runout starts : The station of a PI of a horizental curve is 60+20. The horizental curve has a degree of 4 and a length of 400ft. the othere given design perameters include. Superelevation runoff rate is 1/400. width of the pavement is is 15ft.

Compute the direction of the induced current in the loop : A square loop 15 cm on a side lies in the xy plane. Its resistance is .55 ohm. A magnetic field points in the +z direction, What is the direction of the induced current in the loop

What bolt sizes must be used for the allowable shear stress : A structural steel beam is attached to a column with bolts. The downward force on the connection is 150 kips. What bolt sizes must be used if the allowable shear stress is 25.0 ksi

User Account

All Pages