Using present value analysis estimate the number of zero-coupon bonds(each with a face value of $1000) that will have to be offered to provide the $1 million Laurinburg Precision Engineering needs for expansion if investors seek a yield of 10%. Assume interest will compound on a semiannual basis over the life of the five-year bond issue.

2. Assume that McKinnon and MacDougald decide to issue coupon bonds to finance the expansion of Laurinburg Precision Engineering. The terms of the $1,000 bonds due January 15, 2009, specify an interest rate of 10% with semiannual compounding of interest payments. However, Shelia Cox is able to find a group of investors who will accept a yield of 8% interest. how much will the investors be willing to pay for the 10% bonds?

3. If zero-coupon bonds with semiannual compounding to be due January 15, 2009, are issued, what will be the amount due on that date if enough bonds are issued to provide $1 million on January 15, 2004, if the investors seek a yield of 8%?

4. How should Oliver MacKinnon and Beacham McDougald decide which bonds (the zero-coupon bonds or the 10% coupon bonds) to issue? What factors should they consider? Why?