I completed all of the questions except B-1. You need to choose between making a public offering and arranging a private placement. In each case, the issue involves $9.1 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 8.05%, and the debt would be issued at face value. The underwriting spread would be 1.69%, and other expenses would be $71,000. A private placement: The interest rate on the private placement would be 8.5%, but the total issuing expenses would be only $21,000. Required: a-1. Calculate the net proceeds from public issue. a-2. Calculate the net proceeds from private placement. b-1. Calculate the PV of the extra interest on the private placement.
I completed all of the questions except B-1. You need to choose between making a public offering and arranging a private placement. In each case, the issue involves $9.1 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 8.05%, and the debt would be issued at face value. The underwriting spread would be 1.69%, and other expenses would be $71,000. A private placement: The interest rate on the private placement would be 8.5%, but the total issuing expenses would be only $21,000. Required: a-1. Calculate the net proceeds from public issue. a-2. Calculate the net proceeds from private placement. b-1. Calculate the PV of the extra interest on the private placement.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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I completed all of the questions except B-1.
You need to choose between making a public offering and arranging a private placement. In each case, the issue involves $9.1 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 8.05%, and the debt would be issued at face value. The underwriting spread would be 1.69%, and other expenses would be $71,000.
- A private placement: The interest rate on the private placement would be 8.5%, but the total issuing expenses would be only $21,000.
Required:
a-1. Calculate the net proceeds from public issue.
a-2. Calculate the net proceeds from private placement.
b-1. Calculate the PV of the extra interest on the private placement.
b-2. Other things being equal, which is the better deal?
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