New Jersey Water Co (NJWC) is considering whether to refund a $50 million, 14% coupon, 30-year bond issue that was sold 5 years ago. It is authorizing $3 million of flotation costs on the 14% bonds over the 30-year life of that issue. NJWC’s investment bankers have indicated that the company could sell a new 25-year issue at an 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. NJWC’s marginal tax rate is 40%. 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 NJWC if refunding takes place? c. What are the relevant annual flotation cost tax effects for NJWC if refunding takes place? d. What is the NJWC bond refunding’s NPV?
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more