The Landers Corporation needs to raise $1.40 million of debt on a 10-year issue. If it places the bonds privately, the interest rate will be 10 percent. Fifteen thousand dollars in out-of-pocket costs will be incurred. For a public issue, the interest rate will be 12 percent, and the underwriting spread will be 3 percent. There will be $150,000 in out-of-pocket costs. Assume interest on the debt is paid semiannually, and the debt will be outstanding for the full 10-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 availableinflow-to the present value of future payments of interest and principal to determine net present value. Assume the stated discount rate is 18 percent annually. Use 9.00 percent semiannually throughout the analysis. (Disregard taxes.) (Assume the $1.40 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.) & Answer is complete but not entirely correct. Net amount to Landers $ $ Private Placement 1,385,000.00 1,385,000 888,755.00 2,273,755.00 Public Issue 1,208,000.00 1,016,554.00 $ 2,224,554.00 Present value of future payments Net present value $ ve of S1, PVE Appendix B Present value of $1, PVF PV=FV 1 Period 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 0.780 0.742 0.672 0.608 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 0.610 0.552 0.453 0.372 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554 0.478 0.412 0.307 0.228 4% 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456 0.375 0.308 0.208 0.141 5% 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 Percent 6% 7% 0.943 0.935 0.890 0.873 0.840 0.816 0.792 0.763 0.747 0.713 0.705 0.666 0.665 0.623 0.627 0.582 0.592 0.544 0.558 0.508 0.527 0.475 0.497 0.444 0.469 0.415 0.442 0.388 0.417 0.362 0.394 0.339 0.371 0.317 0.350 0.296 0.331 0.277 0.312 0.258 0.233 0.184 0.174 0.131 0.097 0.067 0.054 0.034 8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.270 9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.212 0.194 0.178 0.116 0.075 0.032 0.013 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 0.092 0.057 0.022 0.009 11% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.153 0.138 0.124 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 0.059 0.033 0.011 0.003 0.458 0.250 0.436 0.416 0.396 0.377 0.295 0.231 0.142 0.087 0.074 0.232 0.215 0.146 0.099 0.046 0.021 0.044 0.015 .005 0 Appendix B (concluded) Present value of $1 Period 1 ..................... 0 NOWOW 13% 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073 0.038 0.020 0.005 0.001 0.295 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 0.215 0.187 0.163 0.141 0.123 0.107 0.093 0.081 0.070 0.061 0.030 0,015 0.004 0.001 16% 0.862 0.743 0.641 0.552 0.476 0.410 0.354 0.305 0.263 0.227 0.195 0.168 0.145 0.125 0.108 0.093 0.080 0.069 0.060 0.051 0.024 0,012 0.003 0.0010 17% 18% 0.855 0.847 0.731 0.718 0.624 0.609 0.534 0.515 0.456 0.437 0.390 0.370 0.333 0.314 0.285 0.266 0.243 0.225 0.208 0.191 0.178 0.162 0.152 0.137 0.130 0.116 0.111 0.099 0.095 0.084 0.081 0.071 0.069 0.060 0.059 0.051 0.051 0.043 0.043 0.037 0.0200.016 0.009 0.007 0.002 0.001 0 0.261 0.231 0.204 0.181 0.160 0.141 0.125 0.111 0.098 0.087 0.047 0.026 0.008 0.002 Percent 19% 0.840 .706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 0.148 0.124 0.104 0.088 0.074 0.062 0.052 0.044 0.037 0.031 0.013 0.005 0.001 0 25% 0.800 0.640 0.512 0.410 0.328 0.262 0.210 0.168 0.134 0.107 0.086 0.069 0.055 0.044 0.035 0.028 0.023 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 0.038 0.031 0.026 0.010 0.004 0.0010 0 30% 0.769 0.592 0.455 0.350 0.269 0.207 0.159 0.123 0.094 0.073 0.056 0.043 0.033 0.025 0.020 0.015 0.012 0.009 0.007 0.005 0.001 35% 0.741 0.549 0.406 0.301 0.223 0.165 0.122 0.091 0.067 0.050 0.037 0.027 0.020 0.015 0.011 0.008 0.006 0.005 0.003 0.002 0.0010 0 40% 0.714 0.510 0.364 0.260 0.186 0.133 0.095 0.068 0.048 0.035 0.025 0.018 0.013 0.009 0.006 0.005 0.003 0.002 0.002 0.001 50% 0.667 0.444 0.296 0.198 0.132 0.088 0.059 0.039 0.026 0.017 0.012 0.008 0.005 0.003 0.002 0.002 0.001 0.001 0.018 0.014 0.012 0.004 0.001 0 0 0 OOOO OOOOOO ......... 0 0 0 Appendix D Present value of an annuity of $1, PVC PVA= 1-11+ Period 4% 5% 1% 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 10.368 11.255 12.134 13.004 13.865 14.718 15.562 16.398 17.226 18.046 22.023 25.808 32.835 39.196 2% 0.980 1.942 2.884 3.808 4.713 5.601 6.472 7.325 8.162 8.983 9.787 10.575 11.348 12.106 12.849 13.578 14.292 14.992 15.678 16.351 19.523 22.396 27.355 31.424 3% 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 11.296 11.938 12.561 13.166 13.754 14.324 14.877 17.413 19.600 23.115 25.730 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8.111 8.760 9.385 9.986 10.563 11.118 11.652 12.166 12.659 13.134 13.590 15.622 17.292 19.793 21.482 0.952 1.859 2.723 3.546 4.329 5.076 5.786 6.463 7.108 7.722 8.306 8.863 9.394 9.899 10.380 10.838 11.274 11.690 12.085 12.462 14.094 15.372 17.159 18.256 Percent 6% 7% 0.943 0.935 1.833 1.808 2.673 2.624 3.465 3.387 4.212 4.100 4.917 4.767 5.582 5.389 6.210 5.971 6.802 6.515 7.360 7.024 7.887 7.499 8.384 7.943 8.853 8.358 9.295 8.745 9.712 9.108 10.106 9.447 10.477 9.763 10.828 10.059 11.158 10.336 11.470 10.594 12.783 11.654 13.765 12.409 15.046 13.332 15.762 13.801 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 8.559 8.851 9% 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 8.061 8.313 8.544 8.756 8.950 9.129 9.823 10.274 10.757 10.962 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 9.077 9.427 9.779 9.915 11% 0.901 1.713 2.444 3.102 3.696 4.231 4.712 5.146 5.537 5.889 6.207 6.492 6.750 6.982 7.191 7.379 7.549 7.702 7.839 7.963 8.422 8.694 8.951 9.042 12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 5.938 6.194 6.424 6.628 6.811 6.974 7.120 7.250 7.366 7.469 7.843 8.055 8.244 8.304 9.122 9.372 9.604 9.818 10.675 11.258 11.925 12.233 ............ Appendix D (concluded) Present value of an annuity of $1 Period 14% 0.877 1.647 50% 0.667 1.111 1.407 1.605 1.737 1.824 1.883 1.922 1.948 13% 0.885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 5.687 5.918 6.122 6.302 6.462 6.604 6.729 6.840 6.938 7.025 7.330 7.496 7.634 7.675 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 5.453 5.660 5.842 6.002 6.142 6.265 6.373 6.467 6.550 6.623 6.873 7.003 7.105 7.133 15% 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 5.234 5.421 5.583 5.724 5.847 5.954 6.047 6.128 6.198 6.259 6.464 6.566 6.642 6.661 16% 0.862 1.605 2.246 2.798 3.274 3.685 4.039 4.344 4.607 4.833 5.029 5.197 5.342 5.468 5.575 5.668 5.749 5.818 5.877 5.929 6.097 6.177 6.233 6.246 17% 0.855 1.585 2.210 2.743 3.199 3.589 3.922 4.207 4.451 4.659 4.836 4.988 5.118 5.229 5.324 5.405 5.475 5.534 5.584 5.628 5.766 5.829 5.871 5.880 18% 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 4.303 4.494 4.656 4.793 4.910 5.008 5.092 5.162 5.222 5.273 5.316 5.353 5.467 5.517 5.548 5.554 Percent 19% 0.840 1.547 2.140 2.639 3.058 3.410 3.706 3.954 4.163 4.339 4.486 4.611 4.715 4.802 4.876 4.938 4.988 5.033 5.070 5.101 5.195 5.235 5.258 5.262 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4.611 4.675 4.730 4.775 4.812 4.843 4.870 4.948 4.979 4.997 4.999 25% 0.800 1.440 1.952 2.362 2.689 2.951 3.161 3.329 3.463 3.571 3.656 3.725 3.780 3.824 3.859 3.887 3.910 3.928 3.942 3.954 3.985 3.995 3.999 4.000 30% 0.769 1.361 1.816 2.166 2.436 2.643 2.802 2.925 3.019 3.092 3.147 3.190 3.223 3.249 3.268 3.283 3.295 3.304 3.311 3.316 3.329 3.332 3.333 3.333 35% 0.741 1.289 1.696 1.997 2.220 2.385 2.508 2.598 2.665 2.715 2.752 2.779 2.799 2.814 2.825 2.834 2.840 2.844 2.848 2.850 2.856 2.857 2.857 2.857 40% 0.714 1.224 1.589 1.849 2.035 2.168 2.263 2.331 2.379 2.414 2.438 2.456 2.469 2.478 2.484 2.489 2.492 2.494 2.496 2.497 2.499 2.500 2.500 2.500 1.965 1.977 1.985 1.990 1.993 1.995 1.997 1.998 1.999 1.999 1.999 2.000 2.000 2.000 2.000