The Bowman Corporation has a bond obligation of $16 million outstanding, which it is considering refunding. Though the bonds were initially issued at 13 percent, the interest rates on similar issues have declined to 11.8 percent. The bonds were originally issued for 20 years and have 10 years remaining. The new issue would be for 10 years. There is a 9 percent call premium on the old issue. The underwriting cost on the new $16,000,000 issue is $460,000, and the underwriting cost on the old issue was $350,000. The company is in a 35 percent tax bracket, and it will use an 10 percent discount rate to analyze the refunding decision. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the present value of total outflows. (Do not round intermediate calculations and round your answer to 2 decimal places.) PV of total outfiows b. Calculate the present value of total inflows. (Do not round intermediate calculations and round your answer to 2 decimal places.) PV of total outflows c. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value d. Should the old issue be refunded with new debt? Yes No . Appendix D Present value of an annuity of $1, PV PV = A Percent 8% 10% Period 95 2 5% 6% 3% 0.917 0.901 0.909 0.926 0.990 1 0.980 0.971 0.943 0.935 0.962 0.952 0893 1.690 1.759 1.736 1.713 1.783 1.808 2 1.970 1.942 1.913 1.886 1.833 1.859 2.577 2.531 2.487 2.444 2402 2.624 2.941 2.884 2.829 2.673 2.775 2.723 3.170 3.102 3.312 3.240 3.037 3.387 3.902 3.808 3.717 3546 3.630 3.465 3.791 3.605 3.696 3.993 3.890 4.100 4.329 4212 5 4.713 4.853 4.580 4.452 4.486 4.623 4.231 4.355 4.767 4.917 5.795 5.601 5.242 5.076 6 5.417 5.033 5.206 4.712 4.564 4.868 5.389 5.582 6.728 6.472 6.002 5.786 2 6.230 5.747 5.535 5.335 5.146 5.971 6.210 6.733 7.652 7.325 6.463 7.020 E 4.968 5.328 5.759 5.995 5.537 6.247 7.108 6.802 7.786 6.515 7.435 8.566 8.162 6.418 7.360 7.024 6.710 6.145 7.722 8.111 8.983 8.530 9.471 5.889 6.207 5.650 5.938 7.499 7.139 6.495 6.805 7.887 8.306 8.760 9.253 9.787 10.368 7.536 7.161 6.814 5.194 6.492 7.943 8 384 10.575 9.954 8863 11.255 9.385 7.904 7.487 7.103 6.750 8.853 8.358 9.394 9.986 10.635 11.348 13 12.134 13 004 7.367 6.628 7.786 6.982 8.745 8.244 9.295 9.899 10.563 12.106 11.296 8.061 7.606 7.191 5.811 8.559 9.108 11.938 10.380 9.712 11.118 12 849 13.865 7.824 6.974 8.313 7.379 9.447 8.851 10.106 10.838 11.652 14.718 13.578 12.561 7.549 8.544 8.022 7.120 9.763 9.122 10.477 11-274 12.166 15 562 14.292 13.166 8.756 8.201 7 250 9.372 7.702 10.059 10.828 11590 12.659 13 754 14 992 SE 16 398 7.839 7366 8.365 10.336 9.604 8.950 11:158 12.085 13 134 14 324 15678 7226 9.514 7469 9.818 7.963 11 470 9.129 10.594 12462 14 822 16 351 13 590 20 9.823 9.077 11.654 10.675 12.783 7843 8.055 15 622 19.523 17413 22023 8.694 10.274 12.409 13.765 11 25a 15.372 17 292 19.500 22 396 25 808 30 8244 9.279 10.757 13 332 17.159 15.046 19.793 27 355 32835 11.925 12 233 23115 25730 9.915 9.042 8304 10.962 13801 18 256 21 482 15.762 3996 31 424 50 Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 1 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.800 0.769 0.741 0.714 0.667 2. 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.440 1.361 1.289 1.224 1.111 3 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 1.952 1.816 1.696 1.589 1.407 4 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.362 2.166 1.997 1.849 1.605 5 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2.689 2.436 2.220 2.035 1.737 6 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 2.951 2.643 2.385 2.168 1.824 7 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.161 2.802 2.508 2.263 1.883 8 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837 3.329 2.925 2.598 2.331 1.922 9 4.946 5.132 4.772 4.607 4.451 4.303 4.163 4.031 3.463 3.019 2.379 2.665 1.948 5.019 10 5.426 4.833 5.216 4.659 4.494 4.339 4.192 2.715 3.571 2.414 3.092 1.965 5.453 5.234 5.687 5.029 4.836 4.656 4.486 4.327 3.656 1.977 2.438 3.147 2.752 4.793 4.611 5.660 5.421 4.988 2.779 4.439 5.197 3.725 3.190 2.456 1.985 5.918 12 4.910 5.583 5.118 4.715 5.342 5.842 4.533 3.780 2.799 3.223 2.469 1.990 6.122 5.008 4.802 5.468 5.229 4.611 5.724 3.824 3.249 2.814 2.478 1.993 6.302 6.002 4.876 5.324 5.092 4.675 3.859 5.575 3.268 2.825 2.484 1.995 5.847 6.142 6462 15 4.938 4.730 5.405 3.887 3.283 2.489 5.162 2.834 1.997 5.668 5.954 6.265 16 6604 4.988 4.775 3.910 5.222 3.295 2.492 1.998 5.475 2.840 5.749 6.729 6.373 17 6.047 5.033 3.928 1.999 5.273 4.812 5.534 3.304 2.844 2.494 5.818 6.128 6.840 18 6.467 5.070 4.843 3.942 3.311 2.848 1.999 5.316 2.496 5.584 5.877 19 6.938 6.550 6.198 1.999 3.316 2.850 2.497 5. 101 4.870 3.954 5353 5628 5.929 6.259 6.623 20 7.025 2.000 2499 3.329 2.856 3.985 5.467 5.195 4.948 5.766 6.097 25 6.464 7330 6.873 2.000 2.857 2.500 3.332 3.995 5.235 4.979 5.517 5.829 7 496 6.566 6.177 30 7.003 2.000 2.852 2.500 3.999 3.333 4.997 5.258 5871 5.548 6.233 6.642 40 7.634 7.105 2.500 2.000 2.852 3.333 5.262 4.000 4.999 5.554 5.880 6.661 7675 7.133 6.246 50