$1$A$.$ After dan's EFN analysis for East Coast Yachts, Larissa has decided to expand the companys operation. She has asked Dan to enlist an underwriter to help sell $$60$ million in new $20-$year bonds to finance new construction. Dan has entered into discussions with Renta Harper an underwriter from the firm of Crowe & Mallard, about which bond features East Coast Yachts should consider and also what coupon rate the issue will likely have. Although Dan is aware of bond features, he is uncertain as to the costs and benefits of some of them, so he isn't clear on how each feature would affect the coupon rate of the bond issue.Dan is also 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.

$2.$How many of the coupon bonds must East Coast Yachts issue to raise the $$60$ million? How many of the zeroes must it issue?

$3.$ In $20$ years, what will be the principal repayment due if East Yachts issues the coupon bonds? What if it issues the zeros?

$4.$ What are the company's considerations in issuing a coupon bond compared to a zero coupon bond?

$5.$ Suppose East Coast Yachts issues the coupon bonds with a make$-$whole call provision. The make$-$whole call rate is the Treasury rate plus $40$ percent. If East Coast calls the bonds in seven years when the Treasury rate is $4\mathrm{.}3\%,$ what is the call price of the bond? what if it is $6\mathrm{.}7$ percent?

$6.$ Are investors really made whole with a make$-$whole call provision?

$7.$ After considering all the relevant factors, would you recommend a zero coupon issue or a regular coupon issue? why? Would you recommend an ordinary call feature or a make$-$whole call feature? why?