Sano Limited has a Rs.1200 million. 11 percent [coupon rate} bond issue outstanding which has 4 years residual maturity. The bonds were issued 4 years ago at par for Rs.1200 million and Sano incurred oatation costs of R530 million which are being amortised for tax purposes at the rate of R5335 million per year. If the bonds are called. the unamortised portion of the oatation costs (Rs.15.0 million} can be deducted for tax purposes. Sano's tax rate is 30 percent. Sano can call the bonds for Rs.1260 million. Assume that the call premium of Rs million can be treated as a tax-deductible expense. Sano has been advised by its merchant bankers that due to fall in interest rates. the rm can issue Rs.1200 million of new bonds at an interest rate of 3 percent and use the proceeds for refunding of old bonds. The new issue will have a maturity of 4 years and inyolye a Iioatation cost of Rs. 2d million. which can be amortised in 4 equal annual instalments for tax purposes. Sano Limited is considering three bonds for investment. A: Rs 1.000. B: Rs 1.000 and G: Rs 1.00. Coupon (interest rate} payable annually bonds are. A: 12 percent. B: 13 and C: 14. The Years to maturity for the bonds are: A; 5. 3:0. 0: T and the redemption value for Bonds 1,000. B: 1.000 and (3:100. The courrent market price for bonds: A: R5000. El: Rs.850. G: 02. (i) What will he the initial nuttay en the bond refunding? iii} What will be the annual net cash sayings an the hand refunding? [iii] What is the mayr er refunding the hand? {10 Marks] What are the {a} yields to maturity {use the approximate formula] {h} durations. and {e} yelatilities at these bonds that Sann is planning to invest? {10 Marks]