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A 79425 b 83606 c 88006 d 92406 e 97027 c 88006 the

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a. $79,425b. $83,606c. $88,006d. $92,406e. $97,027c. $88,006 The City of Charleston issued $3,000,000 of 8% coupon, 30-year, semiannualpayment, taxexempt muni bonds 10 years ago. The bonds had 10 years of callprotection, but now the bonds can be called if the city chooses to do so. The callpremium would be 6% of the face amount. New 20-year, 6%, semiannualpayment bonds can be sold at par, but flotation costs on this issue would be 2%of the amount of bonds sold. What is the net present value of the refunding? Notethat cities pay no income taxes, hence taxes are not relevant.a. $453,443b. $476,115c. $499,921d. $524,917e. $551,163a. $453,443 The State of Idaho issued $2,000,000 of 7% coupon, 20-year semiannualpayment, tax-exemptbonds 5 years ago. The bonds had 5 years of call protection, but now the state
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Chapter 4 / Exercise 4-22
Fundamentals of Financial Management, Concise Edition
Brigham/Houston
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can call thebonds if it chooses to do so. The call premium would be 5% of the face amount.Today 15-year,5%, semiannual payment bonds can be sold at par, but flotation costs on thisissue would be 2%.What is the net present value of the refunding? Because these are tax-exemptbonds, taxes arenot relevant.a. $278,606 b. $292,536 c. $307,163 d. $322,521 e. $338,647a. $278,606 Thompson Enterprises has $5,000,000 of bonds outstanding. Each bond has amaturity value of $1,000, an annual coupon of 12.0%, and 15 years left tomaturity. The bonds can be called at any time with a premium of $50 per bond. Ifthe bonds are called, the company must pay flotation costs of $10 per newrefunding bond. Ignore tax considerations--assume that the firm's tax rate iszero.The company's decision of whether to call the bonds depends critically onthe current interest rate on newly issued bonds. What is the breakeven interestrate, the rate below which it would be profitable to call in the bonds?a. 9.57% b. 10.07% c. 10.60% d. 11.16% e. 11.72%d. 11.16% Rainier Bros. has 12.0% semiannual coupon bonds outstanding that mature in 10years. Each bond is now eligible to be called at a call price of $1,060. If the bondsare called, the company must replace them with new 10-year bonds. The flotationcost of issuing new bonds is estimated to be $45 per bond. How low would theyield to maturity on the new bonds have to be in order for it to be profitable tocall the bonds today, i.e., what is the nominal annual"breakeven rate"?a. 9.29% b. 9.78% c. 10.29% d. 10.81% e. 11.35%c. 10.29% 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 offlotation costs on thesebonds over their 30-year life. The company could sell a new issue of 25-yearbonds at an annual interest rate of 11.67% in today's market. A call premium of14% would be required to retire the old bonds, and flotation costs on the newissue would amount to $3 million. NYW's marginal tax rate is 40%. The newbonds 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?

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Finance, The Land, Stock exchange, AACSB
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Fundamentals of Financial Management, Concise Edition
The document you are viewing contains questions related to this textbook.
Chapter 4 / Exercise 4-22
Fundamentals of Financial Management, Concise Edition
Brigham/Houston
Expert Verified

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