Advanced Refunding decision $($LO$3)$ The Bowman Corporation has a $$20$ million bond obligation outstanding, which it is considering refunding. Though the bonds were initially issued at $12$ percent, the interest rates on similar issues have declined to $10\mathrm{.}5$ percent. The bonds were originally issued for $20$ years and have $15$ years remaining. The new issue would be for $15$ years. There is an $8$ percent call premium on the old issue. The underwriting cost on the new $$20,000,000$ issue is $$570,000,$ and the underwriting cost on the old issue was $$400,000.$ The company is in a $35$ percent tax bracket, and it will use a

$7$ percent discount rate $($rounded after$-$tax cost of debt$)$ to analyze the refunding decision.

Should the old issue be refunded with new debt?