Determine the required after-tax refunding investment

Reference no: EM13477492

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 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. NYW's marginal tax rate is 40%. The new bonds would be issued when the old bonds are called.

What is the required after-tax refunding investment outlay, i.e., the cash outlay at the time of the refunding?

Reference no: EM13477492

Questions Cloud

Te growth rate is expected to fall to constant rate of 7 : abc just paid a dividend of 3.00. it is expected to grow at 20 per year over the following three years and then from

With emerging information regarding the nsas prism program : with emerging information regarding the nsas prism program and chinas golden shield project has either country directly

Define the philosophy of crime reduction through : q explain the philosophy of crime reduction through environmental design crted. how can one go about using the risk

Does firm appear to have effective corporate governance : loren seguara and dale johnson both work for sports products inc. a major producer of boating equipment and

Determine the required after-tax refunding investment : new york waste nyw is considering refunding a 50000000 annual payment 14 coupon 30-year bond issue that was issued 5

Explain the differences between conflict management as well : q define the differences between conflict management and anger management. how would you use each in order to help

Prepare a paragraphs that briefly explain your : your work as a management information consultant has led you to a long-term project working on a custom decision

Asume that one year after tealls bonds were issued going : 1. one year ago teall inc. issued a 20-year 6 annual coupon bond at a par value of 1000. suppose that one year after

Delivery demonstrates the ability to use appropriate word : organization demonstrates the ability to analyze content logically concisely and in an appropriate manner to

User Account

All Pages