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What should be the coupon rate on the new bond issue

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Reference no: EM132698629

Problem - Global Products plans to issue long-term bonds to raise funds to finance its growth. The company has existing bonds outstanding that are similar to the new bonds it expects to issue. The existing bonds have a face value equal to $1,000, mature in 10 years, pay $60 interest annually, and are currently selling for $1,077 each. Global's marginal tax rate is 40 percent.

Required -

(a) What should be the coupon rate on the new bond issue?

(b) What is Global's after-tax cost of debt?

Reference no: EM132698629

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