HW10-28 - $20,000.00 MACRS 5-year class tax rate 0.4...

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Mullet Technologies: whether or not to refun Input data (in U.S. dollars) Existing bond issue $75,000,000.00 original flotation cost $5,000,000.00 maturity of original debt 25 years since old issue 5.00 call premium 0.12 new sell original coupon rate 0.12 after-tax cost of new debt 0.06 Schedule of Cash Flows: Investment Outlay Call premium on the old bond Flotation costs on new bond Immediate tax savings on old flotation cost Interest on old bond Interest on new bond net interest savings
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nd $75 million??? New bond issue $75,000,000.00 new flotation cost $5,000,000.00 new bond maturity 25 new cost of debt tax rate 0.4 short-term interest rate 0.1 Before-tax After-tax $9,000,000.00 $45,000,000.00 $5,400,000.00 $2,700,000.00 $2,700,000.00
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Kouros Vala Western Fabrics: purchase new price $250,000.00 n (years) of loan 4 interest 0.1 maintain/service fee per year
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Unformatted text preview: $20,000.00 MACRS 5-year class tax rate 0.4 Western Fabrics: Dollar Cost Analysis (in U.S. dollars) Cost of Owning (borrowing and Buying) Year 0 Year 1 after-tax loan payments $15,000.00 maintenance cost $20,000.00 $20,000.00 maintenance tax savings $8,000.00 $8,000.00 depreciation tax savings residual value tax on residual value net cash flow (time line) PV cost of owning Cost of Leasing lease payment payment tax savings net cash flow PV cost of leasing at Cost comparison Net advantages to leasing (NAL) lease price at t=0 $70,000.00 t=1 $70,000.00 t=2 $70,000.00 t=3 $70,000.00 t=4 $70,000.00 Net price $350,000.00 book value at t=4 $42,500.00 Year 2 Year 3 Year 4 $15,000.00 $15,000.00 $265,000.00 $20,000.00 $20,000.00 $8,000.00 $8,000.00...
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This note was uploaded on 09/08/2010 for the course BUS 173A at San Jose State University .

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HW10-28 - $20,000.00 MACRS 5-year class tax rate 0.4...

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