NorthWest Water (NWW)
Five years ago, NorthWest Water (NWW) issued $50,000,000 face value of 30-year bonds carrying a 14% (annual payment) coupon. NWW is now considering refunding these bonds. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual interest rate of 11.67% in today's market. A call premium of 14% would be required to retire the old bonds, and flotation costs on the new issue would amount to $3 million. NWW's marginal tax rate is 40%. The new bonds would be issued when the old bonds are called.
Refer to the data for NorthWest Water (NWW). What is the required after-tax refunding investment outlay, i.e., the cash outlay at the time of the refunding?
A. $5,049,939
B. $5,315,725
C. $5,595,500
D. $5,890,000
E. $6,200,000
Answer: E
You might also like to view...
File Transfer Protocol (FTP) is a common way of transmitting files from one computer to another.
Answer the following statement true (T) or false (F)
Businesses record goodwill ________.
A) when they enjoy an outstanding reputation and loyalty with customers B) if they acquire another company at an amount higher than the market value of its net assets C) when they continue the business of an acquired company D) if their market value has increased significantly in the recent years
One way to move from the social contact to the business contact is to thank the customer for taking time to meet with you and then review your goals for the meeting. Which of the following approaches is this?
A) product demonstration B) agenda C) social D) referral E) customer benefit
Business communicators need to understand the following fact about persuasion:
A) it is not coercion. B) it is a way of forcing individuals to believe in something. C) it does not require motivation D) it is not needed in the business environment E) it helps understand an organization's mission