Question 1 (1 point) Five years ago, North West Water (NWW) issued $50,000,000 face value of 30-year bonds carrying a 14% (annual payment) coupon. The company is now considering refunding these bonds. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual interest rate of 11.67% in today's market. A call premium of 14% would be required to retire the old bonds, and flotation costs on the new issue would amount to $3 million. Its marginal tax rate is 40%. The new bonds would be issued when the old bonds are called. What will the net increase or decrease in the annual flotation cost tax savings be if refunding takes place? 1) $8,900 2) $9,680 3) $8,000 4) $6,480 5 5) $7,200