With the existing (old) bonds being worth a total of $13,673,538 in the market, we concluded that the present value of savings from any form of refinancing was zero.

Assume now that the existing bond can be called immediately by the firm. They would then have to pay face value of each bond, plus a call premium of $47 per bond. What would the total present value of savings be under this new situation?

par value 10,000,000

coupon 10%

rate 5%

maturity 20

semiannual payment 500,000