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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The Answer of 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?

A Firm Has $45,000,000 of Preferred Shares Outstanding That Have