Heer Don't upload any image please The Wagner Corporation has a $15 million bond obligation outstanding, which it is considering refunding. Though the bonds wereinitially issued at 10 percent, the interest rates on similar issues have declined to 8.6 percent. The bonds were originally issued for 20years and have 16 years remaining. The new issue would be for 16 years. There is a 7 percent call premium on the old issue. Theunderwriting cost on the new $15 million issue is $500,000, and the underwriting cost on the old issue was $350,000. The company isin a 30 percent tax bracket, and it will allow an overlap period of one month (1/12 of the year). Treasury bills currently yield 5 percent.(Do not round intermediate calculations. Enter the answers in whole dollars, not in millions. Round the final answers to nearestwhole dollar.)a. Calculate the present value of total outflows.Total outflowsb. Calculate the present value of total inflows.Total inflowsLAc. Calculate the net present value.Net present valued. Should the old issue be refunded with new debt?YesO No

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Answered: a. Calculate the present value of total…

a. Calculate the present value of total outflows. Total outflows $ b. Calculate the present value of total inflows. Total inflows c. Calculate the net present value. Net present value $[

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.B: Bond Refunding Analysis

Problem 1P

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Appendix D Present value of an annuity of $1, PVa PV-A1- (1+ i Percent Period 1% 2% 3% 4% 5% 6% 7% 9% 10% 11% 12% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 2. 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 2.941 2.884 2.829 2.775 2.723 2673 2.624 2.577 2.531 2487 2.444 2.402 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 ... 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 5.889 5.650 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 6.207 5.938 11. 16 .. 11.255 10.575 9.954 9.385 B.863 8.384 7.943 7.536 7.161 6.814 6.492 6.194…
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