Calculate the net proceeds from public issue

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Question - A public issue: The interest rate on the debt would be 8.85%, and the debt would be issued at face value. The underwriting spread would be 1.57%, and other expenses would be $87,000.

A private placement: The interest rate on the private placement would be 9.7%, but the total issuing expenses would be only $37,000.

a-1. Calculate the net proceeds from public issue. (Enter your answer in dollars not millions of dollars.)

a-2. Calculate the net proceeds from private placement. (Enter your answer in dollars not millions of dollars.)

b-1. Calculate the Present Value of the extra interest on the private placement. (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?

Reference no: EM133153204

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