Question Details

Accounting Homework Help

The City of Oxford issued $5 million of 8% coupon, 30-year,semiannual payment, tax-exempt municipal bonds 10 years ago. Attime of issue, the bonds had 10 years of call protection. Nowhowever, the bonds can be called if the city chooses to do so. Thecall premium is 6% of the face value. New 20-year, 5%, semiannualpayment bonds ($5 million) can be sold at par, but flotation costson this new issue would be 1.5%. Calculate the initial cost ofrefunding. Tax rate = 0%.

a. $30,000

b. $240,000

c. $375,000

d. $693,000

e. None of the above