Question 1 (35 marks) Dewey, Cheetham, and Howe Ltd. has had several successful years and greatly improved their financial position. As the new vice-president of finance, you are considering refinancing existing bonds with a new issue. You note in particular a bond issue that has the following details: Maturity value of bond issue $ 59.000.000 Time to maturity (in years) 12 Time since initial bond issue (in years) 9 Annual coupon rate on existing bond 11.5% Call Premium No call allowed during the first 5 years Starting call premium in year 6 11% Call premium declines by 0.5% per year staring in year 7 Current long-term interest rates on similar bonds 9.500% Current short-term interest rates 6.0% Overlap period (in months) 1 Corporate tax rate 30% Underwriting and other issue costs $ 1,000,000 Should the old issue be refunded and replaced with a debt issue with a comparable maturity and a coupon rate equal to that currently in effect on similar bonds? Show your calculations