Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. transistor group issued 20-year bonds 8 years ago

Transistor Group issued 20-year bonds 8 years ago at par, when the yield-to-maturity on the...

80.2K

Verified Solution

Question

Finance

image

Transistor Group issued 20-year bonds 8 years ago at par, when the yield-to-maturity on the issue was 10.0 percent. Since then, the yield-to-maturity has decined to 9.0 and the company is considering refunding the $8 million outstanding. They would replace it with an issue of equal size, for the number of years remaining of the original issue. The company would have to pay a cal premium of 6.0 percent on the old issue and underwriting cost on the new $8 milion issue is $300,000. The company is in a 40.0 percent tax bracket, and there will be an overlap period of 1 month. Treasury Bils currently yield 3.0 percent per year. [1] Required: Compute the Net Present Value of the refund decision and answer the question on whether or not the bond should be refunded. Enter the discount rate with two decimal places. (eg. 12.34%) Round all cash flow numbers to zero decimal places. Enter cash outflows as negative numbers. Enter Net numbers for each cash flow (egenter underwriting costs net of tax)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Assume the following information 180 day US interest rate = 8% 180 day British interest rate =...

Finance
Q

Starting with the external ear moving inward, summarize the three divisions of the ear and list...

Medical Sciences
Q

In a Newton's Ring experiment, the diameter of the 20th dark ring was found to...

Physics
Q

Seventeen coulombs of positive charge flow from the +9 V positive terminal of a battery...

Physics
Q

11 Weeds among the Corn Lamb s quarter is a common weed that interferes with...

Statistics
Q

Chapter 4- Data Collection 4.1 Introduction EVA, as a method to...

Accounting
Q

Place the general sequence of steps of the audit process (shown below) in the correct...

Accounting
Q

Alamos Co. exchanged equipment and $17,200 cash for similar equipment. The book value and the...

Accounting
Q

Risk Free Rate 3% Market Return 8% ERP = Market return Rf = 5%...

Accounting
Q

Dunkin Doughnuts. discloses the following inventory information for September: Purchases Sales Sept 1st Beginning...

Accounting
Q

4. (6 points) Bank Reconciliation Foreman Corp. prepares monthly bank reconciliations of its checking account...

Accounting
Q

What is Financial analysis and ratio analysis of Nintendo company?

Accounting