eBook

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, which have a face

value equal to $$1,000$ and a coupon rate of interest equal to $7$ percent $($semiannual payments$),$ mature in $20$

years. These bonds are currently selling for $$949$ each. Global's marginal tax rate is $40$ percent.

a$.$ What should be the coupon rate on the new bond issue? Round your answer to one decimal place.

$\%$

b$.$ What is Global's after$-$tax cost of debt? Round your answer to one decimal place.

$\%$