You need to choose between making a public offering and arranging a private placement. In each case, the issue involves $10.3 million face value of 1O-year debt. You have the following data for each: • A public issue: The interest rate on the debt would be 8.65%, and the debt would be issued at face value. The underwriting spread would be 1.53%, and other expenses would be $83,000. • A private placement. The interest rate on the private placement would be 9.3%, but the total issuing expenses would be only $33,000. Required: a-1. Calculate the net proceeds from public issue. a-2. Calculate the net proceeds from private placement. b-1. Calculate the PV of the extra interest on the private placement. b-2. Other things being equal, which is the better deal? Complete this question by entering your answers in the tabs below.

You need to choose between making a public offering and arranging a private placement. In each case, the issue involves $10.3 million face value of 1O-year debt. You have the following data for each: • A public issue: The interest rate on the debt would be 8.65%, and the debt would be issued at face value. The underwriting spread would be 1.53%, and other expenses would be $83,000. • A private placement. The interest rate on the private placement would be 9.3%, but the total issuing expenses would be only $33,000. Required: a-1. Calculate the net proceeds from public issue. a-2. Calculate the net proceeds from private placement. b-1. Calculate the PV of the extra interest on the private placement. b-2. Other things being equal, which is the better deal? Complete this question by entering your answers in the tabs below.

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Description: You need to choose between making a public offering and arranging a private placement. In each case, the issueinvolves $10.3 million face value of 10-year debt. You have the following data for each:• A public issue: The interest rate on the debt wou

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

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