The total principal value of Antipodes Ltd bonds is $45 million, and the bonds have an annual coupon rate of 5 percent. The total cost of refunding (including transactions costs) would be 10 percent of the principal amount raised. The appropriate tax rate for the company is 40 percent. Assume the bonds were issued at par value.

Required:

How low does the borrowing cost need to drop to justify refunding with a new bond issue?