NorthWest Water (NWW) Five Years Ago, NorthWest Water (NWW) Issued $50,000,000 Face Value

question 10

Multiple Choice

NorthWest Water (NWW)
Five years ago, NorthWest Water (NWW) issued $50,000,000 face value of 30-year bonds carrying a 14% (annual payment) coupon.NWW is now considering refunding these bonds.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.NWW's marginal tax rate is 40%.The new bonds would be issued when the old bonds are called.
-Refer to the data for NorthWest Water (NWW) .What is the required after-tax refunding investment outlay, i.e., the cash outlay at the time of the refunding?

• A) $5,049,939
• B) $5,315,725
• C) $5,595,500
• D) $5,890,000
• E) $6,200,000

---

Definitions:

Restore

The action of returning a system or data to a previous state or condition, often from a backup.

Cooling Pad

a device used to reduce the operating temperature of electronic devices, notably laptops, by providing additional cooling.

Overheating

The condition of a device or component operating at a temperature above its intended maximum, often leading to malfunction or damage.

Software Development

The methodology of generating ideas, setting specifications, designing, writing code, keeping records, conducting tests, and fixing errors included in the production and maintenance of applications, frameworks, or different software elements.