The Landers Corporation needs to raise $1.90 million of debt on a 10-year issue. If it...

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The Landers Corporation needs to raise $1.90 million of debt ona 10-year issue. If it places the bonds privately, the interestrate will be 10 percent. Twenty five thousand dollars inout-of-pocket costs will be incurred. For a public issue, theinterest rate will be 12 percent, and the underwriting spread willbe 4 percent. There will be $110,000 in out-of-pocket costs. Assumeinterest on the debt is paid semiannually, and the debt will beoutstanding for the full 10-year period, at which time it will berepaid. Calculate your final answer using the formula and financialcalculator methods.

a. For each plan, compare the net amount of fundsinitially available—inflow—to the present value of future paymentsof interest and principal to determine net present value. Assumethe stated discount rate is 16 percent annually. Use 8.00 percentsemiannually throughout the analysis. (Disregard taxes.)(Assume the $1.90 million needed includes the underwritingcosts. Input your present value of future payments answers asnegative values. Do not round intermediate calculations and roundyour answers to 2 decimal places.)

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Formula Method Private Placement Step 1 Calculate Present Value of Future Payments The present value of future payments can be calculated as follows Present Value of Future Payments Interest Payment11Discount RatePeriodDiscount Rate Principal Repayment1Discount RatePeriod Here Interest Payment 19000001012 95000 Discount Rate 8 and Period 102 20 Using these values in the above formula we get Present Value of Future Payments 95000118208 19000001820 134036560 as required in the question Step 2 Calculate NPV The NPV of Private Placement is See Answer

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The Landers Corporation needs to raise $1.90 million of debt ona 10-year issue. If it places the bonds privately, the interestrate will be 10 percent. Twenty five thousand dollars inout-of-pocket costs will be incurred. For a public issue, theinterest rate will be 12 percent, and the underwriting spread willbe 4 percent. There will be $110,000 in out-of-pocket costs. Assumeinterest on the debt is paid semiannually, and the debt will beoutstanding for the full 10-year period, at which time it will berepaid. Calculate your final answer using the formula and financialcalculator methods.a. For each plan, compare the net amount of fundsinitially available—inflow—to the present value of future paymentsof interest and principal to determine net present value. Assumethe stated discount rate is 16 percent annually. Use 8.00 percentsemiannually throughout the analysis. (Disregard taxes.)(Assume the $1.90 million needed includes the underwritingcosts. Input your present value of future payments answers asnegative values. Do not round intermediate calculations and roundyour answers to 2 decimal places.)