Woodward Inc. has a $10 millian bond obligation outstanding, which it is considering refunding. Though the...

 

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Woodward Inc. has a $10 millian bond obligation outstanding, which it is considering refunding. Though the bonds were initially issued at 10.0 percent, the interest rates on similar issues have declined to 9.0 percent. The bonds were originally issued at par, with a life of 25 years and have 15 years remaining. The new issue would be for 15 years. The call premium is 4.0 percent of the old issue. The underwriting cost on the new Issue is $250,000, and the underwriting cost on the old issue was S250,000. The company is in a 40 percent tax bracket. There will be a 1 month overlap period where the company can invest any excess funds in the money market carning 4 percent per year. Required Enter the present value for each the relevant cash flows in the table below. · Enter the discount rate with two decimal places. (e.g, xX.xx) • Do not enter the $ or % symbol. • Round all cash flow numbers to zero decimal places. · Enter cash outflows as negative numbers. • Enter 'Net' numbers for each cash flow. (e.g enter underwriting costs rnet of tax.) Description Discount Rate Components of Net Present Value: (all numbers should be total, PV, ofter tax) Call Premium Interest Savings Underwriting (Net) Overlap (Net) Net Present Value Woodward Inc. has a $10 millian bond obligation outstanding, which it is considering refunding. Though the bonds were initially issued at 10.0 percent, the interest rates on similar issues have declined to 9.0 percent. The bonds were originally issued at par, with a life of 25 years and have 15 years remaining. The new issue would be for 15 years. The call premium is 4.0 percent of the old issue. The underwriting cost on the new Issue is $250,000, and the underwriting cost on the old issue was S250,000. The company is in a 40 percent tax bracket. There will be a 1 month overlap period where the company can invest any excess funds in the money market carning 4 percent per year. Required Enter the present value for each the relevant cash flows in the table below. · Enter the discount rate with two decimal places. (e.g, xX.xx) • Do not enter the $ or % symbol. • Round all cash flow numbers to zero decimal places. · Enter cash outflows as negative numbers. • Enter 'Net' numbers for each cash flow. (e.g enter underwriting costs rnet of tax.) Description Discount Rate Components of Net Present Value: (all numbers should be total, PV, ofter tax) Call Premium Interest Savings Underwriting (Net) Overlap (Net) Net Present Value

Answer rating: 100% (QA)

Solution DISCOUNT RATE Discount Rate After Tax cost of new debt Interest rate for the new ... View the full answer