The Harding Corporation has $50.9 milion of bonds outstanding that were issued at a coupon rate of 11.25 percent seven years ago Interest rates have fallen to 10 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 30 percent. The underwriting cost on the old issue was 3.4 percent of the total bond value. The underwriting cost on the new issue will be 1.8 percent of the total bond value. The original bond inderiture 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. Discount rate b. Caiculate the present value of total outflows. (Enter the onswers in whole dollars, not in millions. Round "pV Factor" to 3 decimal places. Do not round intermediate calculations. Round the finel onswer to nearest whole dollac.) Total outflows $ c. Calculate the ptesent value of total inflows. (Enter the enswers in whole dollers, not in millions. Round "PV Foctor" to 3 decimal places. Do not round intermediate calculations. Round the finol onswer to neorest whole doller.) Total inflows $ d. Calculate the net present value, (Enter the answers in whole dollors, not in millions. Round "PV Factor' to 3 decimal ploces. Do b. Calculate the present value of total outfiows. (Enter the answers in whole dollors, not in millions, Round "PV Factor" to 3 decimal places. Do not round intermediate colculations. Round the final answer to nearest whole dollar.) Total outflows c. Calculate the present value of total inflows. (Enter the onswers in whole dollors, not in millions. Round "PV Factor" to 3 decimol ploces. Do not round intermediote calculations. Round the finol onswer to neorest whole dollor.) Total inflows d. Calculate the net present value (Enter the onswers in whole dollars, not in milions. Round "PV Factor" to 3 decimal ploces. Do not round intermediote calculations. Round the final onswer to nearest whole dollar. Negotive amount should be indicated by a minus sign.) Net present value $ e. Should the Harding Corporation refund the old issue? No Yes The Harding Corporation has $50.9 milion of bonds outstanding that were issued at a coupon rate of 11.25 percent seven years ago Interest rates have fallen to 10 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 30 percent. The underwriting cost on the old issue was 3.4 percent of the total bond value. The underwriting cost on the new issue will be 1.8 percent of the total bond value. The original bond inderiture 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. Discount rate b. Caiculate the present value of total outflows. (Enter the onswers in whole dollars, not in millions. Round "pV Factor" to 3 decimal places. Do not round intermediate calculations. Round the finel onswer to nearest whole dollac.) Total outflows $ c. Calculate the ptesent value of total inflows. (Enter the enswers in whole dollers, not in millions. Round "PV Foctor" to 3 decimal places. Do not round intermediate calculations. Round the finol onswer to neorest whole doller.) Total inflows $ d. Calculate the net present value, (Enter the answers in whole dollors, not in millions. Round "PV Factor' to 3 decimal ploces. Do b. Calculate the present value of total outfiows. (Enter the answers in whole dollors, not in millions, Round "PV Factor" to 3 decimal places. Do not round intermediate colculations. Round the final answer to nearest whole dollar.) Total outflows c. Calculate the present value of total inflows. (Enter the onswers in whole dollors, not in millions. Round "PV Factor" to 3 decimol ploces. Do not round intermediote calculations. Round the finol onswer to neorest whole dollor.) Total inflows d. Calculate the net present value (Enter the onswers in whole dollars, not in milions. Round "PV Factor" to 3 decimal ploces. Do not round intermediote calculations. Round the final onswer to nearest whole dollar. Negotive amount should be indicated by a minus sign.) Net present value $ e. Should the Harding Corporation refund the old issue? No Yes
