Fi516 Study Guide
flows? What is the appropriate discount rate to apply to these future cash flows? What is the present value of these cash flows? (Hint: The PVIFA2.4%, 40 = 25.5309.)
h. What is the NPV of refunding? Should GST refund now or wait until later?
a. Since the call premium is 11 percent, the total premium is 0.11($40,000,000) = $4,400,000. However, this is a tax deductible expense, so the relevant after-tax cost is $4,400,000(1 - T) = $4,400,000(0.60) = $2,640,000.
b. The dollar flotation
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