Urgent 3

Investment banks as bond underwriters: Net Present Value of Borrowing Company P needs to choose between making a public offering and arranging a private placement. In each case the issue of euro 50 million face value of 10-year debt. You have the following data for each: Calculate: a. Total issuance costs with public offering b. Total issuance costs with private placement c. NPV of borrowing with public offering d. NPV of borrowing with private placement e. Does company P go for a public offering or a private placement? Why