Question
In: Accounting
As the new vice-president of finance, you are considering refinancing existing bonds with a new issue....
As the new vice-president of finance, you are
considering refinancing existing bonds with a new issue.
You note in particular a bond issue that has the following
details:
Maturity value of bond issue $ 67,000,000
Time to maturity (in years) 10
Time since initial bond issue (in years) 8
Annual coupon rate on existing bond 12.0%
Call Premium
No call allowed during the first 5 years
Starting call premium in year 6 11%
Call premium declines by 0.5% per year staring in year 7
Current long-term interest rates on similar bonds 8.500%
Current short-term interest rates 6.0%
Overlap period (in months) 1
Corporate tax rate 34%
Underwriting and other issue costs $ 900,000
Should the old issue be refunded and replaced with a debt issue
with a comparable
maturity and a coupon rate equal to that currently in effect on
similar bonds? Show
your calculations.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
BQ, Inc., is considering making an offer to purchase iReport Publications. The vice president of finance...
BQ, Inc., is considering making an offer to purchase iReport
Publications. The vice president of finance has collected the
following information:
BQ
iReport
Price–earnings ratio
13.5
9.5
Shares outstanding
1,300,000
195,000
Earnings
$
3,300,000
$
615,000
Dividends
$
830,000
$
280,000
BQ also knows that securities analysts expect the earnings and
dividends of iReport to grow at a constant rate of 5 percent each
year. BQ management believes that the acquisition of iReport will
provide the firm with some economies...
BQ, Inc., is considering making an offer to purchase iReport Publications. The vice president of finance...
BQ, Inc., is considering making an offer to purchase iReport
Publications. The vice president of finance has collected the
following information:
BQ
iReport
Price–earnings ratio
13.8
9.8
Shares outstanding
1,500,000
205,000
Earnings
$
3,500,000
$
625,000
Dividends
$
850,000
$
300,000
BQ also knows that securities analysts expect the earnings and
dividends of iReport to grow at a constant rate of 5 percent each
year. BQ management believes that the acquisition of iReport will
provide the firm with some economies...
BQ, Inc., is considering making an offer to purchase iReport Publications. The vice president of finance...
BQ, Inc., is
considering making an offer to purchase iReport Publications. The
vice president of finance has collected the following
information:
BQ
iReport
Price–earnings ratio
13.5
9.5
Shares outstanding
1,300,000
195,000
Earnings
$
3,300,000
$
615,000
Dividends
$
830,000
$
280,000
BQ also knows that
securities analysts expect the earnings and dividends of iReport to
grow at a constant rate of 5 percent each year. BQ management
believes that the acquisition of iReport will provide the firm with
some economies...
BQ, Inc., is considering making an offer to purchase iReport Publications. The vice president of finance...
BQ, Inc., is considering making an offer to purchase iReport
Publications. The vice president of finance has collected the
following information:
BQ
iReport
Price–earnings ratio
13.8
9.8
Shares outstanding
1,500,000
205,000
Earnings
$
3,500,000
$
625,000
Dividends
$
850,000
$
300,000
BQ also knows that securities analysts expect the earnings and
dividends of iReport to grow at a constant rate of 5 percent each
year. BQ management believes that the acquisition of iReport will
provide the firm with some economies...
BQ, Inc., is considering making an offer to purchase iReport Publications. The vice president of finance...
BQ, Inc., is considering making an offer to purchase iReport
Publications. The vice president of finance has collected the
following information:
BQ
iReport
Price–earnings ratio
13.5
9.5
Shares outstanding
1,300,000
195,000
Earnings
$
3,300,000
$
615,000
Dividends
$
830,000
$
280,000
:
BQ also knows that
securities analysts expect the earnings and dividends of iReport to
grow at a constant rate of 5 percent each year. BQ management
believes that the acquisition of iReport will provide the firm with
some...
BQ, Inc., is considering making an offer to purchase iReport Publications. The vice president of finance...
BQ, Inc., is considering making an offer to purchase iReport
Publications. The vice president of finance has collected the
following information:
BQ
iReport
Price–earnings ratio
13.5
9.5
Shares outstanding
1,300,000
195,000
Earnings
$
3,300,000
$
615,000
Dividends
$
830,000
$
280,000
BQ’s outside
financial consultants think that the 7 percent growth rate is too
optimistic and a 6 percent rate is more realistic.
f-1
What is the value of
iReport to BQ now? (Do not round intermediate calculations
and round...
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remittances (Québec Pension Plan contributions, Québec Parental
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As the vice president of finance for a company producing and selling electronic switchboards, you are...
As the vice president of finance for a company producing and
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Plant, Inc., is considering making an offer to purchase Palmer Corp. Plant’s vice president of finance...
Plant, Inc., is considering making an offer to purchase Palmer
Corp. Plant’s vice president of finance has collected the following
information:
Plant
Palmer
Price-earnings ratio
16.2
12.5
Shares outstanding
1,670,000
920,000
Earnings
$
4,609,200
$
1,150,000
Dividends
$
1,067,000
$
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Plant also knows that securities analysts expect the earnings
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each year. Plant management believes that the acquisition of Palmer
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You are the vice president of finance of Crane Corporation, a retail company that prepared two...
You are the vice president of finance of Crane Corporation, a
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Sales
($5 per unit)
Cost of
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Gross
Margin
Schedule 1
$159,900
$135,482
$24,418
Schedule 2
159,900
140,046
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The computation of cost of goods sold in each schedule is based on
the following data.
Units
Cost
per Unit
Total
Cost
Beginning inventory, January 1
10,050...
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