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A firm is worth $80 or $140 with equal probability. Management wants to issue a bond that has a face value of $90. The cost

A firm is worth $80 or $140 with equal probability. Management wants to issue a bond that has a face value of $90. The cost of capital for all securities is 9%. If the potential bondholders fear that the firm will issue new debt with a face value of $60 that has the same priority as the $90 debt being sold today, what will they require as a return on their investment?

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