ABC Ltd. currently has ₹300 million, 12% bonds outstanding with exactly 6 years remaining to maturity. Observing a decline in market interest rates, the company's management is considering refunding these bonds prior to their maturity date by issuing new bonds at a lower coupon rate to reduce overall cash outflows.

The proposed new issue consists of ₹300 million in 6-year bonds carrying a 10% coupon rate. The issue cost for these new bonds will be ₹6 million. To retire the existing bonds, ABC Ltd. must pay a call premium of 4%. Additionally, the old bonds have an unamortized issue cost of ₹9 million, which can be entirely written off as soon as the old bonds are called. The company falls under a marginal tax rate of 30%.