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New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 14 percent coupon, 30-year bond issue that was issued five 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 percent in today's market. A call premium of 14 percent 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 percent. The new bonds would be issued when the old bonds are called.
The amortization of flotation costs reduces taxes, and thus provides an annual cash flow. What will the net increase or decrease in the annual flotation cost tax savings be if refunding takes place?
(a) $6,480(b) $7,200(c) $8,000(d) $8,800(e) $9,680
The Robinson Company from Problem 2 had net sales of $1,200,000 in 2010 and $1,300,000 in 2011.
By how much does the required rate of return on the riskier stock exceed the required return on the less risky stock?
Gided Cage Corporation uses no debt. The weighted average cost of capital is 15%. The current market value of the company is $60 million. The corporate tax rate is 40%.
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In 1985 U.S. Open winner won $150. In 2009, the winner won $1,350,000. What is the annual percentage increase in the winners prize money over this time period. If the winners prize increases at the same rate, what will it be in 2045?
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A payday loan company charges 6 percent interest for a two-week period. What would be the annual interest rate from that company?
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can you explain why the figure change?if the interest rate doubles, would you expect the mortagage payment to double?
You own 100 shares of Amazon stock (AMZN) and are concerned that the price will go down. You do not want to sell because you have unrecognized capital gains and are in a high tax bracket.
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