The Sunbelt Corporation has $46 million of bonds outstanding that were issued at a coupon rate of 12.375 percent seven years ago Interest rates have fallen to 1150 percent. Mr. Heath the Vice President of Finance, does not expect rates to fall any further. The bonds have 18 years left to maturity, and Mr. Heath would like to refund the bonds with a new issue of equal amount also having 18 years to maturity. The Sunbelt Corporation has a tax rate of 36 percent. The underwriting cost on the old issue was 3.5 percent of the total bond value. The underwriting cost on the new issue will be 1.6 percent of the total bond value. The original bond Indenture contained a five-year protection against a call with a 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 for an approximate answer but calculate your final answer using the formula and financial calculator methods. Assume the discount rate is equal to the aftertax cost of new debt rounded up to the nearest whole percent (eg, 4.06 percent should be rounded up to 5 percent). a. Compute the discount rate. (Do not round Intermediate calculations. Input your answer as a percent rounded up to the nearest whole percent.) Discount b. Calculate the present value of total outflows. (Do not round Intermediate calculations and round your answer to 2 decimal places.) PV of total outflows c. Calculate the present value of total inflows. (Do not round intermediate calculations and round your answer to 2 decimal places.) PV of total inflows d. 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 procent value e. Should the Sunbelt Corporation refund the old issue? Yes No AppendleD Prent value of an annuity of St PVA PVA (+Y Percent KE 51 9 Period 1 2 3 0971 1913 2. R29 3.717 . 10% 0.909 1736 2487 3.170 3.791 4.355 4.860 5 0 4580 7 0990 1.970 2.941 3.902 4853 5.795 6.720 7.652 3.555 9:47 10.360 11.255 12.134 11004 13365 147 5315 25 0.900 1942 2884 3308 4,713 5001 6472 7.325 8.162 8.983 9.787 10.575 51348 92106 12849 1357 14392 1992 1567 1635 1952 221 2735 31434 10 11 0.962 1886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 111 8.750 9.385 9.986 10.550 11 11652 12.155 12650 13.134 13.590 15.622 5.417 6.230 7020 7,786 8.530 9.253 9954 10.535 11.296 11938 12.561 13.166 13.754 14324 T4877 17413 19.000 23.115 25.750 0952 1859 2.723 2546 4.329 5076 5786 6.463 7.108 7.722 0.306 8,863 9.394 9.899 10:380 to 800 11274 11690 12.085 12.452 14094 15.372 17.159 18.256 0.943 1.833 2673 3665 4212 4917 5582 6210 6.802 7.360 7.807 8.384 8.853 9.295 9.712 10.106 10477 10828 11158 11.470 12.73 13.765 15.046 15.762 94 0.917 1759 2531 1940 2 890 4436 5033 5535 1.995 6418 6.805 7.161 7487 7.786 B061 8.313 0935 1 808 2624 3.387 4.100 4767 5389 5.971 6515 7024 7.499 7.943 8.358 3745 9.108 9,442 9763 1009 10 336 10 594 11.654 12109 12332 13.00 BN 0.926 5.783 2577 3312 3.993 4.623 5.206 5,747 6247 5.710 7139 7536 7504 8244 3.559 0.051 9.122 9.172 9.604 981 10.675 11250 11.925 12233 5.759 5.145 6.495 6814 7.103 7367 7.606 7.024 8.022 8201 8.365 3514 9,077 9427 9779 9915 13 14 15 10 17 18 19 20 25 30 10 12 0.893 1.690 2.402 3032 3,605 4111 4.564 4.969 5328 5.650 5.938 6.194 6.424 6620 6811 6974 7. 120 7250 736 0.901 1.213 2444 3102 3696 4.231 4.712 5.146 5.537 58 6207 6492 6.750 6.982 7-191 7.379 7.549 7.702 7.835 7,953 2.42 8.604 2051 02 15 17226 TUS 7460 8.750 8.950 9120 9823 10274 10.757 10.062 25.00 22315 17.292 7.543 8.055 24 B04 19.793 21432 35156 Appendix D (candluded) Present value of an annuity of 1 18% 25% 35% 40% Period 1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 17 10 10 20 tas 0.685 1.668 2,361 2.974 3517 3.998 4,423 4.790 5.132 5426 5.687 5.916 6122 6302 6.462 6604 6723 5.840 6.33 7025 7330 7.496 10% 0.877 1,647 2.322 2.914 3.433 3.889 4.288 4.639 4946 5.210 5.453 5660 5842 5002 6.142 6.265 6.373 6.467 6550 6523 5.873 7 000 2105 7.123 15% 0.870 1626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5019 5.234 5.421 5583 5.724 5.847 5954 6047 6.128 6.198 6259 6.464 6565 5.542 6.661 16 0.862 1605 2246 2.798 3274 3.685 4,039 4.344 4.607 4.833 5.029 5.197 5342 5.468 5.575 5.668 5.749 5,818 5.877 5929 6.097 6.177 5.233 6.246 17 0.855 1585 2210 2.743 3.199 3.589 3922 4207 4 455 4559 4.836 4.988 5.118 5.229 5.324 5.405 5.475 5.534 5584 5.628 5.766 5829 5.671 5.000 0.847 1.566 2174 2690 3.127 2 498 3812 4078 4303 4494 4656 4.793 4910 5.000 5092 5.162 5.222 5273 5.316 5353 5.467 5512 5548 5554 Porcent 19% 0.840 1547 2.140 2639 3058 3410 3.706 3954 4.163 4339 4.486 4611 4.715 4.802 4.875 4.938 4.988 5033 5.070 5.101 5.195 5.235 5.250 5262 20% 0.833 1528 2.106 2589 2991 3.326 3.605 3.837 4031 4.192 4.327 4.439 4533 4611 4675 4.730 4.775 4.812 4.843 4870 4.940 4.979 4.907 4999 0.800 1.440 1952 2.362 2689 2.951 3.161 3320 3.463 3.521 3656 3.725 3.780 3.824 3.859 3887 3.910 3928 3942 3954 3985 3.995 3999 4000 30% 0.769 1 361 1816 2166 2436 2643 2802 2.925 3.019 3092 3.147 3.190 3223 3249 3.268 3283 3.295 3304 3311 3116 3329 2332 3.330 3333 0.741 1289 1.696 1.997 2.220 2385 2.500 2.598 2665 2.715 2752 2.779 2.799 2.814 2825 2.834 2840 2,844 2.848 2.850 2.856 2.857 2857 2.857 0.714 1.224 1.589 1.849 2035 2.168 2.263 2.331 2379 2.414 2.438 2.456 2469 2.478 2.484 2.489 2.492 2494 2496 2.497 2.499 2.500 2.500 2.500 SON 0.667 1.111 1407 1.605 1.737 1.824 1883 1922 1948 1.965 1977 1985 1.990 1.993 1.995 1.902 1.990 1999 1.990 1.999 2.000 2000 2.000 2000 30 40 50 7675