You have decided to advance refund $10,000,000 of outstanding debt that is callable in five years. The interest rate on these bonds is 8 percent. You can issue new bonds at 6 percent. For every dollar of new debt issued, you will incur a 5 percent issuance cost. Interest payments on the present issue are $800,000 per year with no scheduled principal payments.
Question:
How much new debt needs to be issued to realize defeasance of the present issue?
A. $10,004,400
B. $10,839,600
C. $11,410,105
D. $11,381,580