Reference no: EM132673943

At December 31,2021, a company has just finished up a major project for which they had issued debt securities to raise the necessary funds. The $250 million in annual bonds was issued on January 1, 2008 with a coupon rate of 8.75% (paid annually) for 99.33. The bonds are due on December 31, 2047. They are in a position to refinance the debt dependent. The company's concern is to obtain the most positive economic impact irrespective of the accounting outcome. If they refund an equal par debt, their desired annual payment is $20 million and they would prefer to make the payments on a semiannual basis. The new issue would keep the December 31, 2047 due date.

• They have asked that you provide them with your suggestions for the timing of the refinance and accounting of the transactions that will occur. They have also asked that you provide a comparative (with and without the bond repurchase and reissue) set of financial statements showing how the financials would be impacted by the transactions.

Problem 1: Determine the rate at which would refund in order to achieve the objectives