Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please provide your answer with the calculation! thanks:) Transistor Group issued 20-year bonds 8 years ago at par, when the yield-to- maturity on the issue

please provide your answer with the calculation!
thanks:)
image text in transcribed
image text in transcribed
image text in transcribed
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 declined 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 call premium of 6.0 percent on the old issue and underwriting cost on the new $8 million issue is $300,000. The company is in a 40.0 tax bracket, and there will be an overlap period of 1 month. Treasury Bills currently yield 3.0 percent per year. [1] Required: A. Enter the discounted present value for each of the relevant cash flows in the table below: Enter the discount rate with two decimal places. (e.g. 12.34%) Round all cash flow numbers to zero decimal places. Enter cash outflows as negative numbers. Enter 'Net' numbers for each cash flow. (e.g enter underwriting costs net of tax.) Discount rate used: Call premium Interest savings Underwriting costs (net) Overlap period (net) Net Present Value B. Should the corporation refund the bond

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Governing The Modern Corporation Capital Markets Corporate Control And Economic Performance

Authors: Roy C. Smith, Ingo Walter

1st Edition

0195171675,0199924015

More Books

Students also viewed these Finance questions