Asbury Corp issued 30 year bonds 11 years ago with a coupon rate of 9 5 Those bonds are now selling to yield 7 The firm also issued some 20 year bonds 2 years ago with an 8 coupon rate The two bond issues are rated equally by Standard and Poors and Moodys Asburys marginal tax rate is 38 a What is A...

Asbury Corp. issued 30-year bonds 11 years ago with a coupon rate of 9.5%. Those bonds are

Question:

Asbury Corp. issued 30-year bonds 11 years ago with a rate of 9.5%. Those bonds are now selling to yield 7%. The firm also issued some 20-year bonds 2 years ago with an 8% rate. The two bond issues are rated equally by Standard and Poors and Moody’s. Asbury’s marginal tax rate is 38%.
a. What is Asbury’s after-tax cost of debt?
b. What is the current selling price of the 20-year bonds?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...