Problem $16-18$

The Wagner Corporation has a $$30$ million bond obligation outstanding, which it is considering refunding. Though the bonds were initially issued at $11$ percent, the interest rates on similar issues have declined to $8\mathrm{.}6$ percent. The bonds were originally issued for $20$ years and have $16$ years remaining. The new issue would be for $16$ years. There is a $8$ percent call premium on the old issue. The underwriting cost on the new $$30$ million issue is $$650,000,$ and the underwriting cost on the old issue was $$500,000.$ The company is in a $30$ percent tax bracket, and it will allow an overlap period of one month $(\frac{1}{12}$ of the year$).$ Treasury bills currently yield $3$ percent. $($Do not round intermediate calculations. Enter the answers in whole dollars, not in millions. Round the final answers to nearest whole dollar.$)$

a$.$ Calculate the present value of total outflows.

Total outflows $

b$.$ Calculate the present value of total inflows.

Total inflows $

c$.$ Calculate the net present value.

Net present value $

d$.$ Should the old issue be refunded with new debt?

Yes

No