The call premium would be 5 percent of the face amount., Ask an Expert

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The State of Florida issued $2,000,000 of 7 percent coupon, 20-year semiannual payment, tax-exempt bonds 5 years ago. The bonds had 5 years of call protection, but now the state can call the bonds if it chooses to do so. The call premium would be 5 percent of the face amount. Today 15-year, 5 percent, semiannual payment bonds can be sold at par, but flotation costs on this issue would be 2 percent, or $40,000. What is the net present value of the refunding?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9419586

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