Zero Coupon Bonds. Suppose your company needs to raise $40 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 5.7 percent, and youre evaluating two issue alternatives a 5.7 percent semiannual coupon bond and a zero coupon. Your companys tax rate is 21 percent.

a. How many of the coupon bonds would you need to issue to raise the $40 million? How many of the zeros would you need to issue?

b. In 20 years, what will your companys repayment be if you issue the coupon bonds? What if you issue the zeros?