Thompson Enterprises has $5000000 of bonds outstanding. Eachbond has a maturity

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Thompson Enterprises has $5000000 of bonds outstanding. Eachbond has a maturity value of $1000 an annual coupon of 12.0% and15 years left to maturity. The bonds can be called at any time witha premium of $50 per bond. If the bonds are called the companymust pay flotation costs of $10 per new refunding bond. Ignore taxconsiderationsassume that the firms tax rate is zero. Thecompanys decision of whether to call the bonds depends criticallyon the current interest rate on newly issued bonds. What is thebreakeven interest rate the rate below which it would beprofitable to call in the bonds? a. 9.57%b. 10.07%c. 10.60%d. 11.16%e. 11.72%

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