I need you to solve questions 1 to 9 Document Preview: COUPON RATE TAX CASE24BM Print Area MI REPCHAIN TB TL CASE24BM Student Version Tucson Entertainment, Inc. Bond Refunding This case illustrates the bond refunding decision. In addition to the standard analysis, the case requires students to think about whether to refund now or to wait in the hope that interest rates will fall further. The case can also be used (with the model) to illustrate the proper analysis when the maturities of the old and new issues differ. Note that the case, and hence the model, assumes ANNUAL coupons. The worksheet contains two separate models. The first is a standard textbook model which implicitly assumes that the new replacement bond has a maturity equal to the remaining life of the old bond. The second model utilizes the same input section of the spreadsheet, but it calculates actual periodic cash flows under each decision for many years into the future, finds the PV of each of these cash flow streams, and then finds the NPV of the replacement decision as the difference between the two. In effect, the second model is a replacement chain analysis for the bond refunding decision. The second model is designed for Question 7 in the directed version, but it can accomodate different issue sizes and coupon rates. However, the model would need to be changed to consider maturities other than those in Question 7. Part 3 shows the effects that changes in tax rates and new coupon rates can have on NPV. Clicking on the TAX tab will result in a graph depicting the effect of tax rates on NPV; Clicking on the COUPON RATE tab will exhibit a graph portraying the effect of the new bond coupon rate on NPV. If you are using the student version of the model, the following cells have been blanked out: D49, D53, E73:E74, D81, G86, D93, E102, F106, D110, F112, E116:E117, D141, F154:F155, and F190:F193. Before using the model, it is necessary to fill in the empty cells with the appropriate formulas. Once Attachments: Tucson-Inc.pdf tusconenterta.xls; I need you to solve questions 1 to 9 Document Preview: COUPON RATE TAX CASE24BM Print Area MI REPCHAIN TB TL CASE24BM Student Version Tucson Entertainment, Inc. Bond Refunding This case illustrates the bond refunding decision. In addition to the standard analysis, the case requires students to think about whether to refund now or to wait in the hope that interest rates will fall further. The case can also be used (with the model) to illustrate the proper analysis when the maturities of the old and new issues differ. Note that the case, and hence the model, assumes ANNUAL coupons. The worksheet contains two separate models. The first is a standard textbook model which implicitly assumes that the new replacement bond has a maturity equal to the remaining life of the old bond. The second model utilizes the same input section of the spreadsheet, but it calculates actual periodic cash flows under each decision for many years into the future, finds the PV of each of these cash flow streams, and then finds the NPV of the replacement decision as the difference between the two. In effect, the second model is a replacement chain analysis for the bond refunding decision. The second model is designed for Question 7 in the directed version, but it can accomodate different issue sizes and coupon rates. However, the model would need to be changed to consider maturities other than those in Question 7. Part 3 shows the effects that changes in tax rates and new coupon rates can have on NPV. Clicking on the TAX tab will result in a graph depicting the effect of tax rates on NPV; Clicking on the COUPON RATE tab will exhibit a graph portraying the effect of the new bond coupon rate on NPV. If you are using the student version of the model, the following cells have been blanked out: D49, D53, E73:E74, D81, G86, D93, E102, F106, D110, F112, E116:E117, D141, F154:F155, and F190:F193. Before using the model, it is necessary to fill in the empty cells with the appropriate formulas. Once Attachments: Tucson-Inc.pdf tusconenterta.xls
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