See Module 20 PowerPoint provided, which utilizes Tables 20.1, 20.2 and 20.3 from the text. submit a reflection discussing the pros and cons of each option.

Module 20 Long Term Financing (pages 191 195; information from Table 20.1)

A major urban center is planning to issue a municipal bond for the construction of a stadium:

The construction cost is $100,000,000

The design cost are estimated to be $10 million

The cost of issuance is 1% of the total (construction & design), or $1,100,000

The interest rate is 5.875%, based on the economic and financial conditions of the city

The term of the bond is 20 years

The city must decide between using:

Level debt service with semi-annual payments; or

Level principal payments made annually.

Level Debt Service Table 20.2

Principal Amount, $111,100,000

Interest Rate, 5.875%

Terms in Years, 20

Annual Debt Service Payment, $9,588,145

Total Interest Paid Over Bond Life, $80,662,892

Total Debt Service Over Bond Life, $191,762,892

Level Principal Payment Table 20.3

Principal Amount, $111,100,000

Interest Rate, 5.875%

Terms in Years, 20

Annual Principal Payment, $5,555,000

Annual Interest Payment is Variable, see Table 20.3 on page 194 for detail on annual interest paid and total annual debt service

Total Interest Paid Over Bond Life, $68,534,813

Total Debt Service Over Bond Life, $179,634,813