Multiple Choice
A firm has a previous debt issue on its balance sheet that pays coupons of 8% annually. Newer bonds with equivalent maturity would have 10% annual coupons in order to sell at par value. Based on this information, which statement is true?
A) The existing bonds would sell for more than par value.
B) The WACC calculation should use 8% as the cost of debt.
C) The WACC calculation should use a value higher than 10% as the cost of debt.
D) The existing bonds would sell at discount.
Correct Answer:
Verified
Correct Answer:
Verified
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