Hi... Please i need your help in this question Q#1: Dairy Corp. has a $10 million bond
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Please i need your help in this question
Q#1: Dairy Corp. has a $10 million bond obligation outstanding which it is considering refunding. The bonds were issued at 12% and the interest rates on similar bonds have declined to 10%. The bonds have 12 years of their 20-year maturity remaining. Dairy will pay a call premium of 6% and will incur underwriting costs of $400,000 immediately. There is no underwriting cost consideration on the old bond. The company is in a 40% tax bracket. There is no overlap interest period. Should the old issue be refunded?
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