Calculating Cost of Debt For the firm in Problem 13.9, suppose the book value of the debt issue is €20 million. In addition, the company has a second debt issue on the market, a zero-coupon bond with 7 years left to maturity;

the book value of this issue is €80 million, and the bonds sell for 58 per cent of par. Assume the face value of the debt is €1,000. What is the company’s total book value of debt? The total market value? What is your best estimate of the after-tax cost of debt now?