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Global Products plans to issue long-term bonds to raise funds to finance its growth. The company has existing bonds outstandin 1 that are similar to
Global Products plans to issue long-term bonds to raise funds to finance its growth. The company has existing bonds outstandin 1 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 6 percent (semiannual payments), mature in 15 years. These bonds are currently selling for $723 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. 9. Tip Top Hats (TTH) is expected to grow at a 6 percent rate for as long as it is in business. Currently the company's common stock is selling for $20 per share. The most recent dividend paid by THH was $4.00 per share. If new common stock is issued, TTH will incur flotation costs equal to 7.0 percent. a. What is the company's cost of retained earnings? Round your answer to two decimal places. % b. What is its cost of new common equity? Round your answer to two decimal places
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