United Brits Ltd. has a bond outstanding that carries a 10 percent coupon rate paid annually....

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United Brits Ltd. has a bond outstanding that carries a 10percent coupon rate paid annually. Current bond yields are 7.5percent. It has $30 million outstanding and 12 years left tomaturity. A new issue would require $500,000 for flotation costs,and the existing issue has written off all its flotation expenses.An overlap period of one month would be anticipated, during whichmoney market rates would be 2.5 percent. United Brits Ltd. has atax rate of 30 percent. The call premium on the outstanding issueis currently at 10 percent. Assume the par value of the bonds is$1,000.
a-1. Compute the discount rate. (Roundthe final answer to 2 decimal places.)
Discount rate %
a-2. Calculate the present value of the totaloutflows. (Round "PV Factor" to 3 decimal places. Do notround intermediate calculations. Enter the answers in wholedollars, not in millions. Round the final answer to the nearestwhole dollar.)
Total outflows $
a-3. Calculate the present value of the totalinflows. (Round "PV Factor" to 3 decimal places. Do notround intermediate calculations. Enter the answers in wholedollars, not in millions. Round the final answer to the nearestwhole dollar.)
Total inflows $
a-4. Calculate the net present value.(Do not round intermediate calculations. Enter the answersin whole dollars, not in millions. Round the final answer to thenearest whole dollar.)
Net present value $
a-5. Would refunding be justified?
Yes
No
b. Compute the price of a bond in the market,if there was no call provision. How does this compare to the callprice? (Round the final answer to 2 decimalplaces.)
Price of a bond $

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United Brits Ltd. has a bond outstanding that carries a 10percent coupon rate paid annually. Current bond yields are 7.5percent. It has $30 million outstanding and 12 years left tomaturity. A new issue would require $500,000 for flotation costs,and the existing issue has written off all its flotation expenses.An overlap period of one month would be anticipated, during whichmoney market rates would be 2.5 percent. United Brits Ltd. has atax rate of 30 percent. The call premium on the outstanding issueis currently at 10 percent. Assume the par value of the bonds is$1,000.a-1. Compute the discount rate. (Roundthe final answer to 2 decimal places.)Discount rate %a-2. Calculate the present value of the totaloutflows. (Round "PV Factor" to 3 decimal places. Do notround intermediate calculations. Enter the answers in wholedollars, not in millions. Round the final answer to the nearestwhole dollar.)Total outflows $a-3. Calculate the present value of the totalinflows. (Round "PV Factor" to 3 decimal places. Do notround intermediate calculations. Enter the answers in wholedollars, not in millions. Round the final answer to the nearestwhole dollar.)Total inflows $a-4. Calculate the net present value.(Do not round intermediate calculations. Enter the answersin whole dollars, not in millions. Round the final answer to thenearest whole dollar.)Net present value $a-5. Would refunding be justified?YesNob. Compute the price of a bond in the market,if there was no call provision. How does this compare to the callprice? (Round the final answer to 2 decimalplaces.)Price of a bond $