Company A sells $$60$ million in new $20-$year bonds to finance new construction. The company is considering whether to issue coupon$-$bearing bonds or zero$-$coupon bonds. The YTM on either bond issue will be $5\mathrm{.}8$ percent. The coupon bond would have a $5\mathrm{.}8$ percent coupon

rate. The company$$s tax rate is $21$ percent.

$1.$ How many of the coupon bonds must East Coast Yachts issue to raise the $$60$ million?

How many zeroes must it issue? $(2\mathrm{.}5$ mark$)$

$2.$ In $20$ years, what will be the principal repayment due if East Coast Yachts issues the

coupon bonds? What if it issues the zeroes? $(2\mathrm{.}5$ mark$)$

$3.$ What are the company$$s considerations in issuing a coupon bond compared to a zerocoupon bond? $(5$ mark$)$