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What will be its before-tax cost of debt

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Question: Notable Nothings plans to issue new bonds with the same yield as its existing bonds. The existing bonds have a coupon rate of interest equal to 5.6 percent (semiannual interest payments), 12 years remaining until maturity, and a $1000 maturity value; they are currently selling for $918 each.

(a) If Notable issues new bonds today, what will be its before-tax cost of debt?

(b) What will be its before-tax cost of debt if the price of its existing bonds is $730 when Notable issues the new bonds?

Reference no: EM131477380

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