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1. Woodgate Inc. is considering a project with the following after-tax operating cash flows with a required rate of return of 10% and a reinvestment rate of 15% (in millions of dollars): Project Year Cash Flow 0 -$300 1 125 2 75 3 200 4 100 a. What is the project‚s payback period? b. What is the project‚s discounted payback period? c. What is the project‚s IRR? d. What is the project‚s NPV? e. What is the project‚s MNPV? f. What is the project‚s MIRR? 2. New York Water (NYW) 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. NYW'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. NYW'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 savings for NYW if refunding takes place? c. What are the relevant annual flotation cost tax effects for NYW if refunding takes place? d. What is the NYW bond refunding's NPV? 3. The following data apply to Saunders Corporation's convertible bonds: page 756 hard value over share received 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 Saunders' bonds should sell?

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