Maryland water co. (njwc) is considering whether to refund a $50

1.   Johnson company Inc. is considering a project that has the following cash flow and WACC is 12.00%

Year                                       0                              1                              2                              3                     4      

Cash flows                   -$1,200                   $400                          $425                      $450                  $475


a.       Calculate payback period?

b.       Calculate discounted payback period?

c.        Calculate NPV?

d.       Calculate IRR?

e.        Calculate MIRR?

f.        Calculate MNPV (if reinvestment rate is 14%)?


2.  Maryland water Co. (NJWC) is considering whether to refund a $50 million, 14 percent coupon, 30-year bond issue that was sold 5 years ago. It is amortizing $3 million of flotation costs on the 14 percent bonds over the 30-year life of that issue. MDWC’s investment bankers have indicated that the company could sell a new 25-year issue at an interest rate of 11.67 percent in today’s market. A call premium of 14 percent would be required to retire the old bonds, and flotation costs on the new issue would amount to $3 million. MDWC’s marginal tax rate is 40 percent. The new bonds would be issued at the same time the old bonds were called.


a.       What is the relevant refunding investment outlay?

b.       What are the relevant annual interest saving for MDWC if refunding takes place?

c.        What are the relevant annual flotation cost tax effects for MDWC if refunding takes place?

d.       What is the MDWC bond refunding’s NPV?


3. The following data apply to Johnson Corporation’s convertible bonds:

    Maturity:                                           10                           Stock price:                           $30.00

    Par value:                                          $1,000.00             Conversion price:                 $35.00

    Annual coupon:                               5.00%                    Straight-debt yield               8.00%


a.       What is the bond’s conversion ratio?

b.       What is the bond’s conversion value?

c.        What is the bond’s straight-debt value?

d.       Based on your answers to the three preceding questions, what is the minimum price (or “floor” price) at which the Johnson’s bonds should sell?

4.  SYCOM Inc. is considering a leasing arrangement to finance some manufacturing equipments that it needs for the next 3 years. The equipments will be obsolete and worthless after 3 years. The firm will depreciate the cost of the equipments on a straight line basis over their 3-year life. It can borrow $4,800,000, the purchase price, at 10% and buy the equipments, or it can make 3 equal end of year lease payments of $2,100,000 each and lease them. The loan obtained from the bank is a 3-year simple interest loan, with interest paid at the end of the year. The firm’s tax rate is 40%. Annual maintenance costs associated with ownership are estimated at $240,000, but this cost would be borne by the lessor if it leases.

What is the net advantage to leasing (NAL)?

5.  Walker Hardware, a national hardware chain, is considering purchasing a smaller chain, Dell Hardware.  Walker’s analysts project that the merger will result in incremental free flows and interest tax saving with a combined present value of $75.52 million, and they have determined that the appropriate discount rate for valuing Dell is 16%. Dell has 4 million shares outstanding and 5 million debt. Dell’s current price is $15.25. What is the maximum price per share that Walker should offer?


6. Suppose 144 yen could be purchased in the foreign exchange market for one U.S. dollar today. If the yen depreciates by 8.0% tomorrow, how many yen could one U.S. dollar buy tomorrow?


7.  If one U.S. dollar buys 1.64 Canadian dollars, how many U.S. dollars can you purchase for one Canadian dollar?

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more