The Harding Corporation has $$51\mathrm{.}8$ million of bonds outstanding that

were issued at a coupon rate of $12\mathrm{.}25$ percent seven years ago. Interest

rates have fallen to $10\mathrm{.}9$ percent. Preston Alter, the vice$-$president of

finance, does not expect rates to fall any further. The bonds have $18$ years

left to maturity, and Preston would like to refund the bonds with a new

issue of equal amount also having $18$ years to maturity. The Harding

Corporation has a tax rate of $17\mathrm{.}5$ percent. The underwriting cost on the

old issue was $4\mathrm{.}3$ percent of the total bond value. The underwriting cost

on the new issue will be $1\mathrm{.}8$ percent of the total bond value. The original

bond indenture contained a five$-$year protection against a call, with an $8$

percent call premium starting in the sixth year and scheduled to decline

by one$-$half percent each year thereafter $($Consider the bond to be seven

years old for purposes of computing the premium$).$ Use Appendix D$.$

a$.$ Compute the discount rate. $($Round the final answer to $2$ decimal

places.$)$

Discount rate

b$.$ Calculate the present value of total outflows. $($Enter the answers in

whole dollars, not in millions. Round $"$PV Factor" to $3$ decimal places.

Do not round intermediate calculations. Round the final answer to

nearest whole dollar.$)$

Total outflows

c$.$ Calculate the present value of total inflows. $($Enter the answers in

whole dollars, not in millions. Round $"$PV Factor" to $3$ decimal places.

Do not round intermediate calculations. Round the final answer to

nearest whole dollar.$)$

Total inflows d$.$ Calculate the net present value. $($Enter the answers in whole dollars,

not in millions. Round $"$PV Factor" to $3$ decimal places. Do not round

intermediate calculations. Round the final answer to nearest whole

dollar. Negative amount should be indicated by a minus sign.$)$

Net present value

e$.$ Should the Harding Corporation refund the old issue?

Yes

No