Listen Decent Blokes Corporation issued 20-year bonds 5 years ago at par, when the yield...
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Listen Decent Blokes Corporation issued 20-year bonds 5 years ago at par, when the yield to maturity on the issue was 9.0 percent. Since then, the yield to maturity has declined to 8.0 and the company is considering refunding the $35 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 70 percent on the old issue and underwriting cost on the new $35 million issue is $650.000. The company is in a 30.0 tax bracket and there will be an overlap period of 1 month. Treasury Bills currently vield 4.0 percent per year. 110) Paragraph BI V Required: A Enter the present value for each the relevant cash flow in the table below. Required: A. Enter the present value for each the relevant cash flow in the table below. Enter the discount rate with two decimal places. leg. 12.34% Round all cash flow numbers to zero decimal places Enter cash outflows as negative numbers. Enter Net' numbers for each cash flow.leg enter underwriting costs net of tax.) 5.60% Discountate used call prema Interest savings Underwriting costs (net) Ovetiap period (not NAP Present Valle -1715000 2442945 39 129625.70 -1208333 7
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