On December 31, 2016, TNT Express, Inc., has $1,000,000 of 8 percent, 10-year bonds outstanding. These bonds

Question:

On December 31, 2016, TNT Express, Inc., has $1,000,000 of 8 percent, 10-year bonds outstanding. These bonds were issued on January 1, 2010, at par value. Interest rates have dropped to 5 percent, and the president of the company is considering buying back the outstanding 8 percent bonds and issuing new 10-year bonds with an 5 percent interest rate.
1. How much money would TNT Express save in interest payments if new, 5 percent bonds were issued?
2. Under what circumstances would this action be advantageous for TNT Express?
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

College Accounting Chapters 1-30

ISBN: 978-0077862398

14th edition

Authors: John Price, M. David Haddock, Michael Farina

Question Posted: