You own all the equity of Messrs. FINA Corp. The company has no debt. The companys annual cash flow is $900,000 before interest and taxes. The corporate tax rate is 35%.

You have the option to exchange half of your equity position for 5% bonds with a face value of $2,000,000.

Should you take this option and why? Discuss your answer by comparing the companys value pre and post decision while taking into consideration the savings in taxes.