(Answered) Question - a firm has 45000000 of preferred shares

Accounting

Question - A firm has $45,000,000 of preferred shares outstanding that have a yield of 10 percent on par and are callable at a 3 percent premium. New issues will cost $980,000 in issuing and underwriting expenses.

a. At what interest rates would the firm want to refinance?

b. If the dividend yield drops to 8 percent, how long will it take before the present value of the interest savings exceeds the cost of refinancing?

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