Before refunding bonds, what is generally assessed?

The assessment of the refunding plan's impact on cash flow is crucial before refunding bonds because it directly influences the government's ability to manage its financial resources effectively. When considering a bond refunding, it is essential to analyze how the new bond issuance and the subsequent retirement of the old bonds will affect the cash needs over time. This includes evaluating the interest payments, any upfront costs associated with the refinancing, and the timing of the cash flows.

Understanding the cash flow implications helps ensure that the refunding will enhance financial flexibility, minimize future expenditures, and possibly lead to savings. It's also important for determining if the benefits of refunding, such as lower interest costs or altered cash flow structures, outweigh any short-term negative impacts or transaction costs.

Other factors like the interest rate environment, deferred losses, and total interest expenses are also important in the overall analysis but do not have the immediate and direct impact on cash flow as the refunding plan itself does. Cash flow analysis remains a fundamental part of the decision-making process regarding bond refunding, which is why assessing its impact is a typical preliminary step.