M/s. Transindia itd is contemplating calling Rs. 3 crores of 30 yrs 1,000 bond issued 5 yr ago with a coupon interest rate of 14%. The bonds have a call price of 1,140 and had initially collected proceeds of 2.91 crores. The initial floatation cost was Rs. 360000. The company intends to sell 3 crores, 12% 25 yr bond to raise funds for retiring the old bonds. It proposes to sell the new bonds at their par value of Rs. 1000. The estimated floatation cost is 4,00,000. The company is paying 40% tax and after tax cost of debt is 8%. As the new bonds must first be sold and their proceeds, then used to retire old bonds, the company expects a two months period of overlapping interest during which interest must be paid on both the old and new bonds. New What is the feasibility of refunding bonds. old