Answer Happy

The Bowman Corporation has a bond obligation of $15 millionoutstanding, which it is considering refunding. Though the bondswere initially issued at 12 percent, the interest rates on similarissues have declined to 10.8 percent. The bonds were originallyissued for 20 years and have 10 years remaining. The new issuewould be for 10 years. There is a 8 percent call premium on the oldissue. The underwriting cost on the new $15,000,000 issue is$450,000, and the underwriting cost on the old issue was $340,000.The company is in a 35 percent tax bracket, and it will use an 11percent discount rate to analyze the refunding decision.Use Appendix D for an approximate answer but calculateyour final answer using the formula and financial calculatormethods.
a. Calculate the present value of totaloutflows. (Do not round intermediate calculations andround your answer to 2 decimal places.)
b. Calculate the present value of totalinflows. (Do not round intermediate calculations andround your answer to 2 decimal places.)
c. Calculate the net presentvalue. (Negative amount should be indicated by a minussign. Do not round intermediate calculations and round your answerto 2 decimal places.)