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Unformatted text preview: expensed each year. The bonds were issued 5 years ago: 5/25($2,400,000) = $480,000 already expensed Remaining to be expensed = $2,400,000 - $480,000 = $1,920,000 If the old cost is refunded the remaining to be expensed can be immediately expensed and will result in a tax savings of T($1,920,000) = (0.4)(($1,920,000)= $768,000.000 d) Net after-tax cash outlay required to refund the old issue: Old issue call premium $2,640,000 New issue flotation cost 1,600,000 Tax savings on old issue flotation costs (768,000 ) Net cash outlay $3,472,000...
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This note was uploaded on 05/01/2011 for the course FIN 5516 taught by Professor Clyne during the Spring '11 term at DeVry Buckhead.
- Spring '11