New York Waste (NYW) Is Considering Refunding a $50,000,000, Annual

question 4

Multiple Choice

New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 14% coupon, 30-year bond issue that was issued 5 years ago. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual 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. NYW's marginal tax rate is 40%. The new bonds would be issued when the old bonds are called.
-What is the NPV if NYW refunds its bonds today?

• A) $1,746,987
• B) $1,838,933
• C) $1,935,719
• D) $2,037,599
• E) $2,241,359

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Definitions:

Annual Salary

An annual salary is a fixed amount of money paid to an employee by an employer in return for work performed, calculated on a yearly basis.

Consumer Products

Goods that are intended for final consumption by individuals or households.

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An event where professionals discuss trends, strategies, and innovations in the field of marketing.

Environmental Harm

Damage caused to the natural environment, often due to human activity, impacting ecosystems, biodiversity, and human health.