Calculate investors required rate of return today

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Reference no: EM13732267

(Bonds) A company has an outstanding issue of $1,000 face value bonds with a 9.5% annual coupon and 20 years remaining until maturity. The bonds are currently selling at a price of 90 (90% of face value). An investment bank has advised that a new 20-year issue could be sold for a flotation cost of 5% of face value. The company is in the 35% tax bracket.

Calculate investors required rate of return today.

Calculate the cost of the new bond financing.

Reference no: EM13732267

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