The Sunbelt Corporation has $44 million of bonds outstandingthat were issued at a coupon rate of 12.175 percent seven yearsago. Interest rates have fallen to 11.50 percent. Mr. Heath, theVice-President of Finance, does not expect rates to fall anyfurther. The bonds have 18 years left to maturity, and Mr. Heathwould like to refund the bonds with a new issue of equal amountalso having 18 years to maturity. The Sunbelt Corporation has a taxrate of 36 percent. The underwriting cost on the old issue was 3.3percent of the total bond value. The underwriting cost on the newissue will be 1.5 percent of the total bond value. The originalbond indenture contained a five-year protection against a call,with a call premium of 8 percent starting in the sixth year andscheduled to decline by one-half percent each year thereafter(consider the bond to be seven years old for purposes of computingthe premium). Use Appendix D for an approximate answer butcalculate your final answer using the formula and financialcalculator methods. Assume the discount rate is equal to theaftertax cost of new debt rounded up to the nearest whole percent(e.g. 4.06 percent should be rounded up to 5 percent).

a. Compute the discount rate. (Do notround intermediate calculations. Input your answer as a percentrounded up to the nearest whole percent.)
Discount Rate:_____________

b. Calculate the present value of totaloutflows. (Do not round intermediate calculations and roundyour answer to 2 decimal places.)
PV of total outflows:_________

c. Calculate the present value of totalinflows. (Do not round intermediate calculations and roundyour answer to 2 decimal places.)
PV of total inflows:_______

d. Calculate the net present value.(Negative amount should be indicated by a minus sign. Donot round intermediate calculations and round your answer to 2decimal places.)
Net present value:_______
e. Should the Sunbelt Corporation refund the oldissue?
Yes or No