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2. What happens if there is a downgrade in Senior Care's bond rating? Suppose the major bond rating agencies unexpectedly downgrade Senior Care's credit rating from A to triple-B before the firm could initiate the refunding, resulting in a 7.5 percent coupon rate and flotation costs of 1.5 percent on the new issue. How would these changes affect the refunding decision?

3. Do you recommend that Senior Care refund the bonds now (Catalan), one year from now (Marchiano), or not at all (Mathias)? Explain your recommendation.

4. In your opinion, what are three key learning points illustrated in the case?