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New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 10% coupon, 30-year bond issue...

New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 10% 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 6% in today's market. A call premium of 10% 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. Should NYW proceed with the bond refunding? What is the NPV?

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Net Present value Pvofcash P f cash CN.P)T inElowis - Ous flows -. Outflow、- ace ralue to be bou ahe Total oue Plow - 5 5, o0, o 009 000. rnflow - MewPso CeedS-$ 50,000 00 -) Computation ﹀ Pre end value o Tax Savg Totae floafcost of cd 300,000 0O Oo943, too are 162, 2→メ5,000,000 x 40%xo-9434 一) $1,886,800 . -)resent vauw fo 15, 3Mo, oso. Tant ..-Soco,oo.t 9434004 , 886 ,800 +1。2, 26 7 +,3mog。 -Net Present vae-yi0, 22, 54+

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