Question: Consider the refinancing situation in the case of Lyons Document Co. With the existing (old) bonds being worth a total of $11,541,502 (market yield 6%,

Consider the refinancing situation in the case of Lyons Document Co. With the existing (old) bonds being worth a total of $11,541,502 (market yield 6%, coupon rate 8% bond issue 10000000 maturity date =10.5 years and FV= 1000) in the market, we concluded that the present value of savings from any form of refinancing was zero. Assume now that the existing bond can be called immediately by the firm. They would then have to pay the face value of each bond, plus a call premium of $42 per bond. What would the total present value of savings be under this new situation?

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