A. Perform a complete bond refunding analysis. What is the bond refunding's NPV?
B. At what interest rate on the new debt is the NPV of the refunding no longer positive?
Sunday, 15 June 2014
Managerial Finance
Start with the partial model in the file Ch20 P06 Build a Model.xls.
on the textbook's Web site. Schumman Shoe Manufacturer is considering
whether or not to refund a $70 million, 10% coupon, 30-year bond issue
that was sold years ago. Its amortizing $4.5 million floatation costs on
the 10% bond over the issue's 30-year life. Shaumman's investment
bankers have indicated that the companycould sell a new 22-year issue at
an interest rate of 8% in today's market . Neither they or Schumann's
management anticipate that interest rate will fall below 6 percent
anytime soon, but there is a chance that interest rates will increase.
A. Perform a complete bond refunding analysis. What is the bond refunding's NPV?
B. At what interest rate on the new debt is the NPV of the refunding no longer positive?
A. Perform a complete bond refunding analysis. What is the bond refunding's NPV?
B. At what interest rate on the new debt is the NPV of the refunding no longer positive?
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