You are the CFO of Company XYZ. To expand the companys operations, you enlisted an underwriter to help sell $50 million in new 20-year bonds to finance a growth project. You are considering whether to issue coupon bearing bonds or zero-coupon bonds. The YTM on either bond issue will be 7.5 percent. The coupon bond would have a 6.5 percent coupon rate. The companys tax rate is 35 percent.

Q3. What are the companys considerations in issuing a coupon bond compared to a zero-coupon bond? (10 pts) If the company had the options of issuing any of these three bonds:

1- Bond A with a 7% annual coupon, matures in 12 years, and a $1,000 face value.

2- Bond B with a 9% annual coupon, matures in 12 years, and a $1,000 face value.

3- Bond C with an 11% annual coupon, matures in 12 years, and a $1,000 face value.

Each bond has a yield to maturity of 9%. From an investors perspective answer the following questions.