BOND ISSUE After Dan's EFN analysis for East Coast Yachts {see the Closing Case In Chapter 3). Larissa has decided to expand the company's operations. She has asked Dan to enlist an underwriter to help sell $45 million in new 30year bonds to finance new construction. Dan has entered into discussions with Renata Harper, an underwriter from the firm of Crowe & Mallard, about which bond features East Coast Yachts should consider and also what coupon rate the issue will likely have. Although Dan is aware of bond features, he is uncertain as to the costs and benefits of some of them. so he isn't clear on how each feature would affect the coupon rate ofthe bond issue' Page 163 h. Any negative covenants. Also, ciscuss several possible negative covenants East Coast Yachts might consider. i. A conversion feature {note that East Coast Yachts is not a publicly traded company). j. A oating rate coupon. Dan is also considering whether to issue couponbearing bonds or zero coupon bonds. The YTM on either bond issue will be 6.2 percent. The coupon bond would have a 6.2 percent coupon rate. The company's tax rate is 21 percent. .You are Renata's assistant, and she has asked you to prepare a memo to Dan describing the effect of each of the following bond features on the coupon rate ofthe bond. She would also like you to list any advantages or disadvantages of each feature. a. The security of the bond, that is. whether or not the bond has collateral. b. The seniority of the bond. c. The presence ofa sinking fund. d. A call provision with specified call dates and call prices. e. A deferred call accompanying the above call provision. f. A makewhole call provision. d. Anv positive covenants. Also. discuss several possible oositive covenants East Coast Yachts mioht consider. 2. How many of the coupon bonds must East Coast Yachts issue to raise the $45 million? How many of the zeroes must it issue? 3. In 30 years, what will be the principal repayment due if East Coast Yachts issues the coupon bonds? What if it issues the zeroes? 4. What are the company's considerations in issuing a coupon bond compared to a zero coupon bond