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TRUE Inc. is considering whether or not to refund an existing bond issue. Old bond...

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Finance

TRUE Inc. is considering whether or not to refund an existing bond issue.

Old bond issue:

Principal: $ 20 million

Annual Interest rate: 12%

Remaining maturity: 5 years

New bond issue:

Principal: $20 million

Annual interest rate: 9%

Underwriting cost: 2.5%

Call premium: 6%

Tax rate= 30%

Determine the NPV of this decision.

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