Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

"Mullet technologies is considering whether or not to refund a $75 million dollar, 12% coupon, 30-year bond issue that was sold 5 years ago. It is amortizing $5 million of floatation costs on the 12% bonds over the issue's 30 year life. Mullet's investment banks have indicated that the company could sell a new 25-year issue at an interest rate of 10% in today's market. Neither they nor Mullet's management anticipate that the interest rates will fall below 10% anytime soon but theres a chance that rates will increase.

A call premium of 12% would be required to retire the old bonds and flotation costs on the new issue would amount to $5 million. Mullets marginal federal-plus-state tax rate is 40%. The new bonds would be issued 1 month before the old bonds are called, with the proceeds being invested in shorty-term government securities 6% annually during the interim period.

A.perform a complet bond refund analysis. What is the bond refunding's NPV?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M946944

Have any Question? 


Related Questions in Basic Finance

1 what is the federal agency underwriting function and what

1. What is the federal agency underwriting function and what does it do for the mortgage market, and ultimately for the borrower? 2. Compare and contrast the two categories of bonds and how they differ from mortgage- bac ...

Suppose that you are a wheat farmer answer the following

Suppose that you are a wheat farmer. Answer the following questions. a. It is September, and you intend to have 50,000 bushels of wheat harvested and ready to sell in November. The current spot market price of wheat is $ ...

Beta electronics is considering the purchase of testing

Beta Electronics is considering the purchase of testing equipment that will cost $633,000 to replace old equipment. Assume the new equipment will generate before-tax savings of $281,000 over the four years. The new equip ...

1 show that in the atsp formulation the connectivity

1. Show that, in the ATSP formulation, the connectivity constraints (6.61) and the subtour elimination constraints (6.62) are equivalent. 2. Show that the number of vertices of odd degree in a graph is even. 3. Let G = ( ...

1 describe how and why a bonds interest rate risk is

1. Describe how and why a bond's interest rate risk is related to its maturity. 2. Explain why municipal bonds can offer lower interest rates than equally risky corporate bonds. 3. Explain why the yield to maturity on a ...

1 discuss the form of calculating risk for an investment

1. Discuss the form of calculating risk for an investment. Include the reference, from where you obtained the information. 2. Why companies pay dividends?

1 name the three general methods of title assurance and

1. Name the three general methods of title assurance and briefly describe each. Which would you recommend to a friend purchasing a home? Why? 2. Would it be legal for you to give a quitclaim deed for the Statue of Libert ...

1 what are some impediments faced by communities wishing to

1. What are some impediments faced by communities wishing to perform hazard mitigation? 2. Name the primary federal mitigation programs, and explain how they serve to reduce hazard risk. 3. Do nonfederal mitigation progr ...

Cost of debt the zephyr corporation is contemplating a new

(Cost of debt) The Zephyr Corporation is contemplating a new investment to be financed 33 percent from debt. The firm could sell new $1,000 par value bonds at a net price of $930. The coupon interest rate is 14 percent, ...

1 in talking to brad you mentioned the increasing threat of

1. In talking to Brad, you mentioned the increasing threat of identity theft. Brad seems concerned and after asking him several questions, you determine the following: a. For convenience, Brad has his driver's license nu ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro