Monster Limos plans to issue new bonds that have the same yield as its existing bonds, which have a coupon rate of interest equal to 4 percent (paid semiannually), eight years remaining until maturity, and a $1,000 maturity value. The existing bonds are currently selling for $886 each.

(a) What should be the coupon rate for the new bonds?

(b) If the firm's marginal tax rate is 40 percent, what will be the after-tax cost of debt associate with the new debt (bonds)?