DO NOT USE EXCEL - With the information provided of Ravidevelopment Groups calculate NPV for proposed refunding idea.

Ravidevelopment Group is considering refunding its $430 million outstanding bond. bond has coupon rate of 26% - all coupons paid annually - and will mature in 11 years.

a month before the old bonds are called the 2 new bonds will have to be issued. Moreover, income from the new bond will be put market to earn 0.66%/monthly . tax rate is 36%.

In order to call the old bond, Ravidevelopment Group gotta pay par value plus 3 coupons and will need to issue two new bonds at par: $270 mill 9% coupon bond - lower coupon rate is due to external public policy - and $270 mil 13% coupon bond. total flotation costs on new issues expected to be $4mil.