The Landry Corporation needs to raise $$1\mathrm{.}70$ million of debt on a $20-$year issue. If it places the bonds privately, the interest rate will be

$15$ percent, and $$15,000$ 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 $1$ percent. There will be $$130,000$ in out$-$of$-$pocket costs.

Assume interest on the debt is paid semiannually, and the debt will be outstanding for the full $20$ years, at which time it will be repaid.

$($Use a Financial calculator to arrive at the answers.$)$

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 $13$ percent annually, but use $6\mathrm{.}50$ 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 Landry

Present value of future payments

Net present value $($public offering$)$

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

Private placement

Public issue