158 Selling bonds.

Rawlings needs to raise $40,800,000for its new manufacturing plant in Jamaica. Berkman Investment Bank will sell the bond for a commission of2.3%. The market yield is currently7.7%ontwenty-year zero-coupon bonds. If Rawlings wants to issue azero-coupon bond, how many bonds will it need to sell to raise the $40,800,000? Assume that the bond is semiannual and issued at a par value of

$1,000.

a.How many bonds will Rawlings need to sell to raise the $40,800,000?(Round to the nearest wholenumber.)

159 Firm commitment versus best efforts.

Astro Investment Bank offers Lunar Vacations the following options on its initial public sale ofequity:

(a) a best efforts arrangement whereby Astro will keep2.6%of the retail sales or

(b) a firm commitment arrangement of $10,100,000. Lunar plans on offering1,000,000shares at $12.25per share to the public.

(c) If it sells100%of theshares, which is the better choice for LunarVacations?

(d) Which is the better choice for Astro InvestmentBank?

(e:Under the best effortsarrangement, what are the proceeds for LunarVacations?