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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 $10.1 million
face value of 10-year debt. You have the following data for each:
A public issue: The interest rate on the debt would be 8.55%, and the debt would be issued at face value. The underwriting
spread would be 1.51%, and other expenses would be $81,000.
A private placement: The interest rate on the private placement would be 9.1%, but the total issuing expenses would be only
$31,000.
a-1. Calculate the net proceeds from public issue.
Note: Enter your answer in dollars not millions of dollars.
a-2. Calculate the net proceeds from private placement.
Note: Enter your answer in dollars not millions of dollars.
b-1. 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-2. Other things being equal, which is the better deal?
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