Suppose S Corporation has $50 million in 12%, fifteen-year corporate bonds outstanding. Now, 5 years later, the Treasurer wishes to replace them with $50 million of 8%, ten-year bonds. Both bonds have semi-annual payments. The call premium is $60 per $1,000. The firm's effective tax rate is 42%

. a) What is the NPV of refinancing? (4 marks)

b) Say instead the Treasurer wishes to replace the 15-year bonds with $50 million of 6% preferred shares (with quarterly payments). What is the NPV of refinancing?