B12.(Net advantage of refunding) IBM has $150 million of 10% sinking-fund debentures out- standing. The issue amortizes in equal annual amounts at the ends of years 10, 11, and 12. The firm can call the bonds at 103%. Its new issue rate is 8% for 10-year debt, 8.5% for 11-year debt, and 9% for 12-year debt. Its marginal income tax rate is 40%. Which sinking-fund amounts should the firm call?

PLEASE ANSWER THE FOLLOWING QUESTIONS

Problem B12:For this problem from your course text, please choose an answer from the followingfor year 10.

a. -$3,821,231; don't refund

b. -$3,315,871; don't refund

c. -$2,852,949; don't refund

d. -$2,249,153; don't refund

e. -$1,724,413; don't refund

f. -$574,931; don't refund

g. $574,931; refund

h. $1,724,413; refund

i. $2,249,153; refund

j. $2,852,949; refund

k. $3,315,871; refund

l. $3,821,231; refund

Problem B12:For this problem from your course text, please choose an answer from the followingfor year 11:

a. -$3,821,231; don't refund

b. -$3,315,871; don't refund

c. -$2,852,949; don't refund

d. -$2,249,153; don't refund

e. -$1,724,413; don't refund

f. -$574,931; don't refund

g. $574,931; refund

h. $1,724,413; refund

i. $2,249,153; refund

j. $2,852,949; refund

k. $3,315,871; refund

l. $3,821,231; refund

Problem B12:For this problem from your course text, please choose an answer from the following foryear 12.

a. -$3,821,231; don't refund

b. -$3,315,871; don't refund

c. -$2,852,949; don't refund

d. -$2,249,153; don't refund

e. -$1,724,413; don't refund

f. -$574,931; don't refund

g. $574,931; refund

h. $1,724,413; refund

i. $2,249,153; refund

j. $2,852,949; refund

k. $3,315,871; refund

l. $3,821,231; refund