Instruction: Read the case study related to East Coast Yachtsand complete the following tasks.

After Dan’s analysis for East Coast Yachts (see the Case studyfor Module 2), Larissa has decided to expand the company’soperations. She has asked Dan to enlist an underwriter to help sell$50 million(total value of all bonds) innew 20-year(maturity of each bond) bondsto finance new construction. Dan has entered into discussions with Kim McKenzie, anunderwriter from the firm of Crowe & Mallard, about which bondfeatures East Coast Yachts should consider and also what couponrate the issue will likely have. After examining all features ofeach type of bonds, Dan is considering to issuecouponbearing bonds or zero couponbonds. The YTM on either bond issue willbe 7.5 percent. Thecoupon bond would have a 7.5percent coupon rate.

1. How many of the coupon bonds must East Coast Yachtsissue to raise the $50 million? How many of the zeroes must itissue? You must show all your works forthe full credits.

2. In 20 years, what will be the principal repaymentdue if East Coast Yachts issues the coupon bonds? What if it issuesthe zeroes? You must show all your worksfor the full credits.

Larissa has been talking with thecompany’s directors about the future of East Coast Yachts. To thispoint, the company has used outside suppliers for various keycomponents of the company’s yachts, including engines. Larissa hasdecided that East Coast Yachts should consider the purchase of anengine manufacturer to allow East Coast Yachts to better integrateits supply chain and get more control over engine features. Afterinvestigating several possible companies, Larissa feels that thepurchase of Ragan Engines, Inc., is a possibility. Ragan Engines, Inc., was founded nineyears ago by a brother and sister—Carrington and GenevieveRagan—and has remained a privately owned company. The companymanufactures marine engines for a variety of applications. Raganhas experienced rapid growth because of a proprietary technologythat increases the fuel efficiency of its engines with very littlesacrifice in performance. The company is equally owned byCarrington and Genevieve. The original agreement between thesiblings gave each 150,000 shares ofstock. Last year, Ragan had an EPS of $5.35 and paid a dividend toCarrington and Genevieve of $320,000each. The company also had a return onequity of 21 percent. Larissa tells Dan that arequired return for Ragan of 18 percentis appropriate.

3. Assuming the company continues its current growthrate, what is the value per share of the company’sstock? You must show all your works forthe full credits.

Step 1: Find totalearnings

Step 2: Find payoutratio

Step 3: Find retentionratio

Step 4: Find growthratio

Step 5: Find total equityvalue

Step 6: Find value pershare