ABC Company currently has $50 million of 12 percent coupon bonds that pay interest semi-annually. These bonds
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ABC Company currently has $50 million of 12 percent coupon bonds that pay interest semi-annually. These bonds are due in 8 years and can be called at a premium of 10 percent. At present, the company can float a new issue of similar bonds with a coupon rate of 10 percent. The company will have to incur issuing and underwriting expenses of $500,000. ABC has a 40% tax rate. Should refinancing take place? Show your calculations.
Related Book For
Financial Accounting
ISBN: 9781618533111
6th Edition
Authors: Michelle L. Hanlon, Robert P. Magee, Glenn M. Pfeiffer, Thomas R. Dyckman
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