Calculate the net proceeds of public issue


You need to choose between the following types of issues: A public issue of $10 million face value of 10-year debt. The interest rate on the debt would be 11.5%, and the debt would be issued at face value. The underwriting spread would be 2.0%, and other expenses would be $79,000. • A private placement of $10 million face value of 10-year debt. The interest rate on the private placement would be 12.0%, but the total issuing expenses would be only $35,000. a)1. Calculate the net proceeds of public issue. Net proceeds of public issue __$ a)2. Calculate the net proceeds of private placement. Net proceeds of private placement $__ b. Other things equal, which is the better deal? Public issue OR Private placement?

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Accounting Basics: Calculate the net proceeds of public issue
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