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Problem 15-6 Problem 15-12

Foundations of Financial M

Spreadsheet Templates by Block and Hirt Copyright © 2008 McGraw-Hill/Irwin and Info-Labs. (www.info-labs.com)

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0 million Public Price Net to Corporation $40 $36.70 $40 $37. $25.0 million c. Size of Offer a.12 What is the percentage underwriting spread for each size offer? What principle does this demonstrate? Copyright © 2008 McGrawHill/ Irwin Spreadsheet Template by Block and Hirt Problem: 15-6 .28 $40 $38. $1. $6.Twelfth Edition Problem 15-6 Objective Underwriting spread Student Name: Course Name: Student ID: Course Number: Assume Fisher Food Products is thinking about three different size offerings for the issuance of addition shares.Foundations of Financial Management Block and Hirt .6 million b.

000.000 $6.12 Percentage Underwriting Spread FORMULA FORMULA FORMULA a.600. b.28 $38.Solution Problem 15-6 Instructions Enter formulas to calculate the percentage underwriting spread.000 Public Price $40 $40 $40 What principle does this demonstrate? Copyright © 2008 McGrawHill/ Irwin Spreadsheet Template by Block and Hirt Problem: 15-6 .000 $25.000. Size of Offer $1. Net to Corporation $36. c.70 $37.

000 shares. accounting. What is the spread on this issue in percentage terms? What are the total expenses of the issue as a percentage of total value (at retail)? b. Its investment banker has informed the company that the retail price will be $18 per share for 600.Foundations of Financial Management Block and Hirt .Twelfth Edition Problem 15-12 Objective Underwriting costs Student Name: Course Name: Student ID: Course Number: Winston Sporting Goods is considering a public offering of common stock.50 per share and will incur $150. how many shares must be sold? Copyright © 2008 McGrawHill/ Irwin Spreadsheet Template by Block and Hirt Problem: 15-12 . The company will receive $16. a. If the firm wanted to net $18 million from this issue.000 in registration. and printing fees.

If the firm wanted to net $18 million from this issue. how many shares must be sold? Copyright © 2008 McGrawHill/ Irwin Spreadsheet Template by Block and Hirt Problem: 15-12 .000 a.Solution Problem 15-12 Instructions Enter formulas to complete the requirements of this problem. and printing fees $18 600. What is the spread on this issue in percentage terms? What are the total expenses of the issue as a percentage of total value (at retail)? Percentage spread Total expenses as a percentage of total value FORMULA FORMULA FORMULA b.50 $150.000 $16. Assumptions Retail price per share Number of shares Net price per share Registration. accounting.

at which time it will be repaid. and the underwriting spread will be 4 percent. Assume interest on the debt is paid semiannually. If it places the bonds privately.000 in out-of-pocket costs. There will be $100.) Copyright © 2008 McGrawHill/ Irwin Spreadsheet Template by Block and Hirt Problem: 15-15 . the interest rate will be 11 percent. Thirty thousand dollars in out-of-pocket costs will be incurred.Foundations of Financial Management Block and Hirt . and the debt will be outstanding for the full 25 year period. the interest rate will be 10 percent. compare the net amount of funds initially available—inflow—to the present value of future payments of interest and principal to determine net present value. For a public issue.Twelfth Edition Problem 15-15 Objective Comparison of private and public debt offering Student Name: Course Name: Student ID: Course Number: The Landers Corporation needs to raise $1 million of debt on a 25-year issue. (Disregard taxes. Which plan offers the higher net present value? For each plan. Assume the stated discount rate is 12 percent annually. Use 6 percent semiannually throughout the analysis.

. To compute present values (i.000. Assumptions Debt Years Interest rate (private placement) Out-of-pocket costs (private placement) Interest rate (public placement) Underwriting spread Out-of-pocket costs (public placement) Stated discount rate $1.000 10% 4% $100.Solution Problem 15-15 Instructions Enter formulas and functions to complete the requirements of this problem. present value of interest payments) use the MS Excel PV function.000 25 11% $30.e.000 12% Private Public Debt issue Out-of-pocket costs Spread Net amount to Landers Interest payments (semiannual) Present value of interest payments Present value of maturity value Net present value FORMULA FORMULA FORMULA FORMULA FORMULA FORMULA FORMULA FORMULA FORMULA FORMULA Copyright © 2008 McGrawHill/ Irwin Spreadsheet Template by Block and Hirt Problem: 15-15 .

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