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A firm has a perpetual callable bond outstanding with a par value of $100 and an annual coupon of $14. The firm can refund this
A firm has a perpetual callable bond outstanding with a par value of $100 and an annual coupon of $14. The firm can refund this with a new noncallable perpetual bond having an 8 percent coupon. The call price on the old bond is $114. Flotation costs for a new issue are 2 percent of par. What is the myopic benefit of refunding?
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