You currently have a 100000000 14 coupon rate 25 year, Ask an Expert

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You currently have a $100,000,000, 14% coupon rate, 25 year outstanding issue that is 5 years old. You sold this issue with flotation cost of $2,800,000, straight line over 25 years. There is a 10% Call Premium and you can now sell a $100,000,000 issue with an 11% coupon for 20 years. There will be flotation cost of $2,500,000 on the new issue and a one-month delay between renewals. Currently, short term rates are 9%, and you are at the 40% tax bracket. Flotation costs on the new issue will also be straight-lined over the life of the issue. Find the NPV of refunding. PLEASE SHOW ALL COMPUTATION

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92414859

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