Transcribed Image Text
Refunding Analysis Mullet Technologies is considering whether ornot to refund a $125 million, 13% coupon, 30-year bond issue thatwas sold 5 years ago. It is amortizing $6 million of flotationcosts on the 13% bonds over the issue's 30-year life. Mullet'sinvestment banks have indicated that the company could sell a new25-year issue at an interest rate of 11% in today's market. Neitherthey nor Mullet's management anticipate that interest rates willfall below 11% any time soon, but there is a chance that rates willincrease. A call premium of 9% would be required to retire the oldbonds, and flotation costs on the new issue would amount to $3million. Mullet's marginal federal-plus-state tax rate is 40%. Thenew bonds would be issued 1 month before the old bonds are called,with the proceeds being invested in short-term governmentsecurities returning 6% annually during the interim period.A. Conduct a complete bond refunding analysis. What is the bondrefunding's NPV? Do not round intermediate calculations. Round youranswer to the nearest cent.I need an answer. There was not an answer given when i postedthe question yesterday just a bunch of different numbers.Thanks.