New york waste nyw is considering refunding a 50000000, Ask an Expert

Finance

New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 14% coupon, 30-year bond issue that was issued 5 years ago. 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 10% 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. NYW's marginal tax rate is 40%. The new bonds would be issued when the old bonds are called. Should the bonds be refunded? Calculate the NPV of refunding.

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9863628

Have any Question?Write your Review or question?

Related Questions in Basic Finance

Arbitrage insures that equal cash flows of equal risk sell

Arbitrage insures that equal cash flows (of equal risk) sell at equal prices and unequal cash flows (of equal risk) sell at equal rates of return once arbitrage has worked to adjust the prices. True or False and why?

For the year just concluded free cash flow to equity fcfe

For the year just concluded, Free Cash Flow to Equity (FCFE) is 100 million. FCFE grows at 10% annually for the next three years, and then is constant (grows at 0%) per year thereafter. The required rate of return on equ ...

Paul wants to accumulate 14500 for the down payment for a

Paul wants to accumulate $14,500 for the down payment for a new condo. He plans to start investing $2,500 annually beginning today. The investment account will pay 10 percent interest compounded annually. How long would ...

1 what considerations do you need to take when considering

1. What considerations do you need to take when considering "time value of money"? 2. Why is the following statement true? "A dollar today is worth more than a dollar tomorrow."

Your firm spends 5200 every month on printing and mailing

Your firm spends $ 5,200 every month on printing and mailing? costs, sending statements to customers. If the interest rate is 0.52% per? month, what is the present value of eliminating this cost by sending the statements ...

If a stock has a beta coefficient of 8 and a required rate

If a stock has a beta coefficient of .8 and a required rate of return equal to 11%, while the market return is equal to 12.5%, what is the risk-free rate of return?

For an 18-year fixed payment loan for 200000 with an annual

For an? 18-year fixed payment loan for? $200,000 with an annual interest rate of? 5.20% and making QUARTERLY? payments, what percent of your first payment would apply to the? principal?

Carnes cosmetics cos stock price is 7588 and it recently

Carnes Cosmetics Co.'s stock price is $75.88, and it recently paid a $2.50 dividend. This dividend is expected to grow by 21% for the next 3 years, then grow forever at a constant rate, g; and rs = 14%. At what constant ...

The following information relates to lobo

The following information relates to Lobo Corporation: Cash $20,000 Accounts receivable $50,000 Marketable securities $65,000 Notes payable $10,000 Ac ...

A risky fund has an expected return of 10 and standard

A risky fund has an expected return of 10% and standard deviation of 15%. The T-Bill rate is 5%. An investor allocates 60% of her retirement portfolio to the risky fund and 40% to T-Bills. What is the investor's risk ave ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert