Retiring Debt Early.

Smith & Company issued $100 million maturity value of six-year bonds, which carried a coupon rate of six percent and paid interest semiannually. At the time of the offering, the yield rate for equivalent risk-rated securities was eight percent. Two years later, market yield rates had risen to ten percent, and since the company no longer needed the debt financing, executives at Smith & Company decided to retire the debt.

Calculate the gain or loss that Smith & Company will incur as a consequence of retiring the debt early. Is

the early retirement of the debt a good decision? What factors should be considered in making this decision?