16-3 Everything is the same except that issued $2 million with a coupon rate of 8 percent a call price of $1,060 at a discount of $20 per bond total discount of $40,000. flotation cost was $25,000 a $2 million new issue of 6 percent The flotation $30,000. The tax rate is 40 percent, and (c) at a 3.6 percent.

nds with a coupon $1,050 were sold 545,000. The initial 16-3 51.5 million new issue ds. The company the price u The Lavely Company issued $1.5 million of 30-year rate of 9 percent five years ago. The bonds with a call pri at a discount of $30 per bond or with a total discou flotation cost was $18,000. The company wishes to sell a $1.5 mil cent 25-vear bonds in order to retire its existing bonds. The intends to sell its new bonds at their face value of $1,000 per bon costs of the new issue are estimated to be $22,000. The compar rate is 50 percent and the new bonds are sold four months before the are called 000 per bond. The flotation 00. The company's marginal tax ths before the old bonds (a) Determine the net cash outflow of the refunding operation. (b) Determine the annual interest savings of the refunding operation (c) Determine the present value of the interest savings over a 25-year period at a 5 percent discount rate. (d) Should the company refund its old bonds? (e) Use the internal-rate-of-return approach to determine whether the company should refund its old bonds or not. nds with a coupon $1,050 were sold 545,000. The initial 16-3 51.5 million new issue ds. The company the price u The Lavely Company issued $1.5 million of 30-year rate of 9 percent five years ago. The bonds with a call pri at a discount of $30 per bond or with a total discou flotation cost was $18,000. The company wishes to sell a $1.5 mil cent 25-vear bonds in order to retire its existing bonds. The intends to sell its new bonds at their face value of $1,000 per bon costs of the new issue are estimated to be $22,000. The compar rate is 50 percent and the new bonds are sold four months before the are called 000 per bond. The flotation 00. The company's marginal tax ths before the old bonds (a) Determine the net cash outflow of the refunding operation. (b) Determine the annual interest savings of the refunding operation (c) Determine the present value of the interest savings over a 25-year period at a 5 percent discount rate. (d) Should the company refund its old bonds? (e) Use the internal-rate-of-return approach to determine whether the company should refund its old bonds or not