For the firm in the previous problem, suppose the book value of the debt issue is $75

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For the firm in the previous problem, suppose the book value of the debt issue is $75 million. In addition, the company has a second debt issue on the market, a zero coupon bond with eight years left to maturity; the book value of this issue is $30 million, and the bonds sell for 81 percent of par. What is the company’s total book value of debt? The total market value? What is your best estimate of the aftertax cost of debt now?

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Corporate Finance

ISBN: 9781265533199

13th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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