The Landers Corporation needs to raise $$1\mathrm{.}30$ million of debt on a $5-$year issue. If it places the bonds privately, the interest rate will be

$10$ percent. Ten thousand dollars in out$-$of$-$pocket costs will be incurred. For a public issue, the interest rate will be $8$ percent, and the

underwriting spread will be $5$ percent. There will be $$120,000$ in out$-$of$-$pocket costs. Assume interest on the debt is paid semiannually,

and the debt will be outstanding for the full $5-$year period, at which time it will be repaid. Use Appendix B and Appendix D for an

approximate answer but calculate your final answer using the formula and financial calculator methods.

a$.$ For each plan, compare the net amount of funds initially available$-$inflow$-$to the present value of future payments of interest and

principal to determine net present value. Assume the stated discount rate is $14$ percent annually. Use $7\mathrm{.}00$ percent semiannually

throughout the analysis. $($Disregard taxes.$)$

Note: Assume the $$1\mathrm{.}30$ million needed includes the underwriting costs. Input your present value of future payments answers

as negative values. Do not round intermediate calculations and round your answers to $2$ decimal places.

b$.$ Which plan offers the higher net present value?

Private placement

Public issue