Sunrise International has had several successful years in the airline business and had received recognition for many years for flying higher, further and cheaper than the competition. In an effort to boost profitability and cash flows further, the new VP Finance is considering refunding some bonds that currently carry fairly high interest payments.Currently the company has a $$10$ million bond obligation outstanding. The bonds were issued at $12\%$ and the interest rates on similar bonds have declined to $10\%.$ The bonds have twelve years of their $20$ year maturity remaining. Sunrise International will pay a call premium of $6\%$ and will incur underwriting costs of $$400,000$ immediately whereas the underwriting cost on the old bond was $$300,000.$ The company is in a $40\%$ tax bracket. There will be a $30-$day overlap period during which the money market rates would be $3\%.$

a$)$ Should the old issue be refunded? Show all your calculations.

b$)$ List two circumstances that would warrant a company$$s consideration for bond refunding.