As the new vice-president of finance, you are considering refinancing existing bonds with a new issue. You note in particular a bond issue that has the following details:

Maturity value of bond issue $ 67,000,000 Time to maturity (in years) 10 Time since initial bond issue (in years) 8 Annual coupon rate on existing bond 12.0% Call Premium No call allowed during the first 5 years Starting call premium in year 6 11% Call premium declines by 0.5% per year staring in year 7 Current long-term interest rates on similar bonds 8.500% Current short-term interest rates 6.0% Overlap period (in months) 1 Corporate tax rate 34% Underwriting and other issue costs $ 900,000

Should the old issue be refunded and replaced with a debt issue with a comparable maturity and a coupon rate equal to that currently in effect on similar bonds? Show your calculations.