A firm has 15% 20-year Rs 5,00,000 debentures. The debentures were issued 5 years ago involving a floatation cost of Rs 20,000. The floatation cost is being charged off for tax purposes as an expense...

A firm has 15% 20-year Rs 5,00,000 debentures. The debentures were issued 5 years ago involving a floatation cost of Rs 20,000. The floatation cost is being charged off for tax purposes as an expense at the rate of Rs 1000 annually flat for 20 years. The debentures incorporate call features with a premium of Rs 50,000. The firm is now considering a new issue of 10% 15-year Rs 50,000 debentures that will involve a floatation cost of Rs 5,000. The tax rate is30 %. Suggest whether the company should opt for a refunding operation.