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You need to choose between making a public offering and arranging a private placement. In each case, the issue involves $ 1 0 . 1
You need to choose between making a public offering and arranging a private placement. In each case, the issue involves $ million
face value of year debt. You have the following data for each:
A public issue: The interest rate on the debt would be and the debt would be issued at face value. The underwriting
spread would be and other expenses would be $
A private placement: The interest rate on the private placement would be but the total issuing expenses would be only
$
a Calculate the net proceeds from public issue.
Note: Enter your answer in dollars not millions of dollars.
a Calculate the net proceeds from private placement.
Note: Enter your answer in dollars not millions of dollars.
b Calculate the Present Value of the extra interest on the private placement.
Note: Do not round intermediate calculations. Enter your answer in dollars not millions of dollars. Round your answer to the
nearest whole dollar amount.
b Other things being equal, which is the better deal?
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