e of the difficulties regulated utilities face in efforts to earn their cost of capital, the pressure would be to refund immediately to lower the risk of higher refunding costs.
8. Now consider the 1971 bond issue. Can that issue be evaluated using the same procedures as you used for the 1991 issue? Explain in words. If you are using the spreadsheet model, find the NPV of refunding the 1971 issue. (Hint: Think of replacement chains in capital budgeting, and use Table 3 to help answer the question.)
Replacement chains assume that the time horizon is a multiple of 12. Thus, the short-time horizon associated with the 1971 bond issue would not make the use of the replacement chain approach feasible. The replacement chain approach is feasible for the 1991 bond issue.
9. What would happen to the NPV of the refunding decision if interest rates rose? If you are using the spreadsheet model, calculate how much interest rates could increase before the refunding becomes unprofitable. Describe how Shenandoah coul
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