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. (a) What should be the 11-1 coupon rate on the new bond issue? (a) What is Global's after-tax cost of debt?
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. (a) What should be the 11-1 coupon rate on the new bond issue? (a) What is Global's after-tax cost of debt?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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11-1 and 11-3
Transcribed Image Text: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. (a) What should be the
11-1
coupon rate on the new bond issue? (a) What is
Global's after-tax cost of debt?
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