Magnavision Electronics has Rs.300 million, 16 per cent bonds outstanding with a balance maturity of 5 years.
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Magnavision Electronics has Rs.300 million, 16 per cent bonds outstanding with a balance maturity of 5 years. As interest rates have fallen, Magnavision can refund its bonds with a Rs.300 million issue of 5 years bonds carrying a coupon rate of 14 per cent. The call premium will be $ per cent. The issue costs on the new bonds will be Rs.6 million. The unamortized portion of the issue costs on the old bonds is Rs.5 million and these can be written off no sooner the old bonds are called. Magnavision's marginal tax rate is 35 per cent. Analyse the bond refunding decision.
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0133400694
1st canadian edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi
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