13-2)

Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond with a face value of $26 million, a maturity of 15 years, and a yield to maturity of 8%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 8%. The face value of the issue is $31 million, and the issue sells for 95% of par value. The firm's tax rate is 35%.

a.What is the before-tax cost of debt for Olympic?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Before-tax cost of debt%

b.What is Olympic's after-tax cost of debt?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

After-tax cost of debt%References

Worksheet