Merton Ltd. has a $30 million bond obligation outstanding, which it is considering refunding. Though the bonds were initially issued at 10.0 percent, the interest rates on similar issues have declined to 9.0 percent. The bonds were originally issued at par, with a life of 20 years and have 10 years remaining. The new issue would be for 10 years. The call premium is 8.0 percent of the old issue. The underwriting cost on the new issue is $650,000, and the underwriting cost on the old issue was $500,000. The company is in a 30 percent tax bracket. There will be a 1 month overlap period where the company can invest any excess funds in the money market earning 3 percent per year.

Required:

Enter the present value for each the relevant cash flows in the table below.

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Description 3 Discou nt Rate Compo nents of Net Presen t Value: (all numbers should be total, PV, after tax) Call Premiu m $ 1680 000 Interes Savings Under writing (Net) Overla p(Net) $ Net Presen t Value Should Merton Ltd. refund the existing bond? YESI Description 3 Discou nt Rate Compo nents of Net Presen t Value: (all numbers should be total, PV, after tax) Call Premiu m $ 1680 000 Interes Savings Under writing (Net) Overla p(Net) $ Net Presen t Value Should Merton Ltd. refund the existing bond? YESI