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ADMS 4540 (15)
Lecture 6

ADMS 4540 Lecture 6: formula1

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Department
Administrative Studies
Course
ADMS 4540
Professor
William Lim
Semester
Winter

Description
ODA semi-am Bond Dunration An Py og bond t-o Time PMT PV RV PPN/Price WV TM RV time par value te test PV Loan haute PM T m CHYTM) tota Last one TPMT Find Prat year 0, PA 17-M 2) YTM M n year o prsx Eond semi-annua N- Amor fx 2. FV. Semi-annua R v PV/Price WV face rTM par-value V of "Grade "flow: PMT loan RV-time toria Bond Price Change: Vo latili Rae x ini ial bond A bond price Price after Bond Price before Present Valve Loan Come Original coupon s h St State-new new P Ms Bond Refund CHt) x compon New 3) cost ofre funding Cov (ax X x premi old bond a Premium Flotation cost cm) cov (rs, xxrs) -t cov(rs, e'rb) Var Flot year h, tax shield. h. tax rate x PMTs h n :S yrs or amort over the life of issue YT FV of tax saving Net Stand devis 2 E Crs tax saving tion Additional Interest: Extra (old) Cov( P) bondx oldrate) m GSP fter tax Interest fic crti t on new invest new bond Rate Cnot Nenowt vers total addi tvun (1-tax) nterest total Invest dost 4) total savng d old x Coupon on ne. W issne nterest on hnte test on new newx new bond h)xCI-tax) x (V) old X were on new issue PV of ahinnal YXavi sold ago. H of year in Project, TT (a t t expected NPNo ZRR cost of CapitaLVI ect total investment cost vofc CATs to. Sk 1: Capital Cost K: discount rate tax shield d depreciationrate NPV nitial Pv of afte Project p fe r-tax Sav Evaluating cost-cutting Replace As NPV inital outlay PV of after-tax saving t old assets salvage Pv of old assets calvage gone +PN of new asset's salvage. Replacement New one cost old one ament price new k, salvage Net cCATS Pv of after tax benetiti P MATT tax). Profit it- discount rate, n. DV of cCA Tc shield. Netcapital 1. as: net salvage (Hdisaourt) PV of salvage Cold ent salvages new equipment salvage V of annul V Annuity due of growing CP v of an annnity) real rate prepetuity Po DI V ected Return r-g C constant growth tt Norina v Inflation or DIV P, P DJV DIVA DIVH
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