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
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 9 percent (semiannual payments), mature in 10 years. These bonds are currently selling for $828 each. Global's marginal tax rate is 40 percent.
What is the company's cost of retained earnings? Round your answer to two decimal places.
What is its cost of new common equity? Round your answer to two decimal places.
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