• anonymous
RefundBond Corp. has a $10 million bond obligation outstanding which it is considering refunding. The bonds were issued at 12% and the interest rates on similar bonds have declined to 10%. The bonds have 12 years of their 20 year maturity remaining. RefundBond will pay a call premium of 6% and will incur underwriting costs of $400,000 immediately. The underwriting cost can be amortized over 5 years. The company is in a 40% tax bracket. There is no overlap interest period. The discount rate is 6% Should the old issue be refunded?
  • Stacey Warren - Expert
Hey! We 've verified this expert answer for you, click below to unlock the details :)
At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga. Et harum quidem rerum facilis est et expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi optio cumque nihil impedit quo minus id quod maxime placeat facere possimus, omnis voluptas assumenda est, omnis dolor repellendus. Itaque earum rerum hic tenetur a sapiente delectus, ut aut reiciendis voluptatibus maiores alias consequatur aut perferendis doloribus asperiores repellat.
  • chestercat
I got my questions answered at in under 10 minutes. Go to now for free help!

Looking for something else?

Not the answer you are looking for? Search for more explanations.