Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has $50.00 million in debt outstanding that pays an 8.75% APR coupon. The debt has an average maturity of 10.00 years. The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and maturity. How much will Javert save on interest payments with this re-finance? You can assume that Javert will issue debt to cover the full price of repurchasing the old debt from part A. (answer in terms of millions, so 1,000,000 would be 1.00) Submit Answer format: Currency: Round to: 4 decimal places.

Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has $50.00 million in debt outstanding that pays an 8.75% APR coupon. The debt has an average maturity of 10.00 years. The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and maturity. How much will Javert save on interest payments with this re-finance? You can assume that Javert will issue debt to cover the full price of repurchasing the old debt from part A. (answer in terms of millions, so 1,000,000 would be 1.00) Submit Answer format: Currency: Round to: 4 decimal places.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 16P

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Question

Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has
$50.00 million in debt outstanding that pays an 8.75% APR coupon. The debt has an average maturity of 10.00 years.
The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and
maturity.
How much will Javert save on interest payments with this re-finance? You can assume that Javert will issue debt to
cover the full price of repurchasing the old debt from part A. (answer in terms of millions, so 1,000,000 would be 1.00)
Submit
Answer format: Currency: Round to: 4 decimal places.

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Many companies look to re-finance their outstanding debt when interest rates fall significantly. Javert Toy Company has $50.00 million in debt outstanding that pays an 9.00% APR coupon. The debt has an average maturity of 10.00 years. The firm can refinance at an annual rate of 5.25%. That is, investors want 5.25% today for bonds of similar risk and maturity. How much will Javert Toy company pay to buy back its current outstanding bonds? (answer in terms of millions, so 1,000,000 would be 1.00) Answer Format: Currency: Round to: 2 decimal places. Enter Answer Here...
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