Bond Refunding. Smith Corporation has a $40 million, 14 percent bond issue outstanding, with 15 years remaining. The call premium is 8 percent of face value. A new 15-year bond issue for $40 million...

Bond Refunding. Smith Corporation has a $40 million, 14 percent bond issue outstanding, with 15 years remaining. The call premium is 8 percent of face value. A new 15-year bond issue for $40 million can be issued at a 10 percent interest rate. Flotation costs applicable to the new issue are $350,000. Should Smith Corporation call the original bond issue?