Question
The ABC Company currently has $50 million of 13 percent coupon bonds that pay interest semi-annually. These bonds are due in 8 years and can
The ABC Company currently has $50 million of 13 percent coupon bonds that pay interest
semi-annually. These bonds are due in 8 years and can be called at a premium of 5 percent.
At present, the company can float a new issue of similar bonds with a coupon rate of 10
percent. The company will have to incur issuing and underwriting expenses of $600,000.
ABC has a 40% tax rate. Should refinancing take place?
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Analysis for Financial Management
Authors: Robert c. Higgins
8th edition
73041807, 73041803, 978-0073041803
