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Woodgate Inc. is considering a project with the following after-tax operating cash flows

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1. Woodgate Inc. is considering a project with the following after-tax operating cash flows with a required rate of return of 10% and a reinvestment rate of 15% (in millions of dollars);Project;Year Cash Flow;0 -$300;1 125;2 75;3 200;4 100;a. What is the project?s payback period?;b. What is the project?s discounted payback period?;c. What is the project?s IRR?;d. What is the project?s NPV?;e. What is the project?s MNPV?;f. What is the project?s MIRR?;2. New York Water (NYW) is considering whether to refund a $50 million, 14 percent coupon, 30-year bond issue that was sold 5 years ago. It is amortizing $3 million of flotation costs on the 14 percent bonds over the 30-year life of that issue. NYW's investment bankers have indicated that the company could sell a new 25-year issue at an interest rate of 11.67 percent in today's market. A call premium of 14 percent would be required to ret;3.;4. ire the old bonds, and flotation costs on the new issue would amount to $3 million. NYW's marginal tax rate is 40 percent. The new bonds would be issued at the same time the old bonds were called.;a. What is the relevant refunding investment outlay?;b. What are the relevant annual interest savings for NYW if refunding takes place?;c. What are the relevant annual flotation cost tax effects for NYW if refunding takes place?;d. What is the NYW bond refunding's NPV?;5. The following data apply to Saunders Corporation's convertible bonds: page 756 hard value over share received;Maturity: 10 Stock price: $30.00;Par value: $1,000.00 Conversion price: $35.00;Annual coupon: 5.00% Straight-debt yield: 8.00%;a. What is the bond's conversion ratio?;b. What is the bond's conversion value?;c. What is the bond's straight-debt value?;d. Based on your answers to the three preceding questions, what is the minimum price (or "floor" price) at which the Saunders' bonds should sell?

 

Paper#31879 | Written in 18-Jul-2015

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