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What is Bond Refunding NPV Calculation Guide about?

1) The company is calculating the net present value of refunding $150 million of bonds with a new bond issue. 2) The initial outflow is $20.6 million which includes call premiums, floatation costs, and interim interest costs. 3) The annual savings are $4.5 million in interest savings and $56,000 in tax savings on floatation costs, totaling $4.518 million in annual inflows. 4) Discounting the annual inflows at 5% for 25 years gives a present value of $63.676 million, resulting in a positive NPV of $44.426

Author

Carlos Alphonce

Language

EN