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You need to choose between making a public offering and arranging a private placement. In...

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Accounting

You need to choose between making a public offering and arranging a private placement. In each case, the issue involves $11 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 9%, and the debt would be issued at face value. The underwriting spread would be 1.6%, and other expenses would be $90,000.
A private placement: The interest rate on the private placement would be 10%, but the total issuing expenses would be only $40,000.
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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