UF S.A. wants to issue bonds maturing in 10 years to raise 5M . It is...

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UF S.A. wants to issue bonds maturing in 10 years to raise 5M €. It is presented with two alternatives: a) Make a public issue at par with a coupon rate of 9%. The underwriter margin is 0.5% of the issuance price and there are no other administrative or legal costs. b) Make a private issue with a coupon rate of 9.125%. The issuance costs are 10.000€. What are the total costs for UF S.A. for each alternative? What is the better option for UF S.A.? (note: use 9% as a discount rate) UF S.A. wants to issue bonds maturing in 10 years to raise 5M €. It is presented with two alternatives: a) Make a public issue at par with a coupon rate of 9%. The underwriter margin is 0.5% of the issuance price and there are no other administrative or legal costs. b) Make a private issue with a coupon rate of 9.125%. The issuance costs are 10.000€. What are the total costs for UF S.A. for each alternative? What is the better option for UF S.A.? (note: use 9% as a discount rate)

Answer rating: 100% (QA)

1 To calculate the total costs for each alternative we need to consider the ... View the full answer