The Bowman Corporation has a bond obligation of $18 million outstanding, which it is considering refunding. Though the bonds were initially issued at 10 percent, the interest rates on similar issues have declined to 8.5 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 $18,000,000 issue is $530,000, and the underwriting cost on the old issue was $380,000. The company is in a 35 percent tax bracket, and it will use an 8 percent discount rate (rounded aftertax cost of debt) to analyze the refunding decision.

a. Calculate the present value of the total outflows.

b. Calculate the present value of the total inflows.

c. Calculate the net present value (Negative amount should be indicated by a minus sign.

d. Should the old issue be refunded with new debt?