Global products plans to issue long-term bonds to raise funds to finance its growth. The company has
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Question:
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 face value equal to $ 1,000, mature in 10 years, pay $60 interest annually, and are currently selling for $ 1,077 each. Globe’s marginal tax rate is 40 percent.
(a) What should be the coupon rate on the new bond issue? (a) What is Global’s after-tax cost of debt?
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