Jessica Simpson, the chief financial officer of Game Inc., could hardly believe the change in interest rates that had taken place over the last few months. The interest rate on AA$-$rated bonds was now $6$ percent. The $$40$ million, $15-$year bond issue that her firm has outstanding was initially issued at par with $9$ percent five years ago.

She was considering refunding the bond issue because interest rates had decreased significantly. The old issue had a call premium of $14$ percent. The underwriting cost on the old issue had been three percent of par, and it would be five percent on the new issue. The tax rate would be $30$ percent, and a $6$ percent discount rate would be applied for the refunding decision. The new bond would have a $10-$year life.

Before Jessica used the $13$ percent call provision to reacquire the old bonds, she wanted to ensure she could not repurchase them cheaper in the open market. As such, she has tasked you to address and offer recommendations.

A$.$ Wants to know the price of the old bonds in the open market.

B$.$ Wants you to compare the price in part $\text{'}A\text{'}$ to the $13$ percent call premium over par value. Based on your analysis of this question, which appears to be more attractive in terms of reacquiring the old bonds? Explain.

C$.$ Jessica also desires an extensive analysis of a refunding decision by estimating the net present value of the inflows and outflows. What is your recommendation?

D$.$ Regarding the refunding decision, how should Barton be influenced if he thinks interest rates might go down even more?