Coinbase, would like to raise $1.50 million of debt on a 25-year issue. If it places the bonds privately, the interest rate will be 13 percent, and $25,000 in out-of-pocket costs will be incurred. The alternative is to engage an investment bank for a public issue where the interest rate will be 12 percent, and the underwriting spread will be 3 percent. They will also incur $150,000 in out-of-pocket expenses.

Assume interest on the debt is paid semi-annually, and the debt will be outstanding for the full 25 years, at which time it will be repaid.

a. For each plan, compare the net amount of funds initially availableinflowto the present value of future payments of interest and principal to determine net present value. Assume the stated discount rate is 14 percent annually, but use 7.00 percent semiannually throughout the analysis. (Disregard taxes.) (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter the answers in dollars not in millions. Omit $ sign in your response. Round the final answer to the nearest whole dollar.)

Private placement
Net amount to Landry	$
Present value of future payments
Net present value (private offering)	$

Public issue
Net amount to Coinbase	$
Present value of future payments
Net present value (public offering)	$

b. Which plan offers the higher net present value?

multiple choice

Private placement

Public issue