Question: Start with the partial model in the file Ch18 P08 Build a Model.xls on the textbooks Web site. Schumann Shoe Manufacturer is considering whether or

Start with the partial model in the file Ch18 P08 Build a Model.xls on the textbooks Web site. Schumann Shoe Manufacturer is considering whether or not to refund a $70 million, 10% coupon, 30-year bond issue that was sold 8 years ago. It is amortizing $4.5 million of flotation costs on the 10% bonds over the issues 30-year life. Schumanns investment bankers have indicated that the company could sell a new 22-year issue at an interest rate of 8% in todays market. Neither they nor Schumanns management anticipate that interest rates will fall below 6% anytime soon, but there is a chance that interest rates will increase. a. Conduct a complete bond refunding analysis. What is the bond refundings NPV? b. At what interest rate on the new debt is the NPV of the refunding no longer positive?

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