The Wagner Corporation has a $20 million bond obligation outstanding, which it is considering refunding. Though...

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The Wagner Corporation has a $20 million bond obligationoutstanding, which it is considering refunding. Though the bondswere initially issued at 16 percent, the interest rates on similarissues have declined to 13.3 percent. The bonds were originallyissued for 20 years and have 16 years remaining. The new issuewould be for 16 years. There is a 9 percent call premium on the oldissue. The underwriting cost on the new $20 million issue is$550,000, and the underwriting cost on the old issue was $400,000.The company is in a 40 percent tax bracket, and it will allow anoverlap period of one month (1/12 of the year). Treasury billscurrently yield 5 percent. (Do not round intermediate calculations.Enter the answers in whole dollars, not in millions. Round thefinal answers to nearest whole dollar.) a. Calculate the presentvalue of total outflows. Total outflows $ b. Calculate the presentvalue of total inflows. Total inflows $ c. Calculate the netpresent value. Net present value $ d. Should the old issue berefunded with new debt? Yes No

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NPV of refunding decision Total cash outflow for refund Present value of annual cash inflowsPresent value See Answer

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The Wagner Corporation has a $20 million bond obligationoutstanding, which it is considering refunding. Though the bondswere initially issued at 16 percent, the interest rates on similarissues have declined to 13.3 percent. The bonds were originallyissued for 20 years and have 16 years remaining. The new issuewould be for 16 years. There is a 9 percent call premium on the oldissue. The underwriting cost on the new $20 million issue is$550,000, and the underwriting cost on the old issue was $400,000.The company is in a 40 percent tax bracket, and it will allow anoverlap period of one month (1/12 of the year). Treasury billscurrently yield 5 percent. (Do not round intermediate calculations.Enter the answers in whole dollars, not in millions. Round thefinal answers to nearest whole dollar.) a. Calculate the presentvalue of total outflows. Total outflows $ b. Calculate the presentvalue of total inflows. Total inflows $ c. Calculate the netpresent value. Net present value $ d. Should the old issue berefunded with new debt? Yes No