I need the answer to this question, but please reference the problem and solution I have attached here at the end. That question has the right answer, just the problem has different values.

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.)

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.)

***SOLUTION FOR THE SAME TYPE OF PROBLEM ONLY THE PROBLEM HAS DIFFERENT VALUES****

Olympic Sports has two issues of debt outstanding. One is a 8% coupon bond with a face value of $31 million, a maturity of 10 years, and a yield to maturity of 9%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with coupons also paid annually, and a coupon rate of 9%. The face value of the issue is $36 million, and the issue sells for 93% 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 : 9.49 1%

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 : 6.17 1%

Explanation:

Some values below may show as rounded for display purposes, though unrounded numbers should be used for the actual calculations.

a.

First, compute the price of the 8% coupon bonds for each $1,000 of face value:

PV	= [(.08 $1,000) (1 / .09 {1 / [.09(1 + .09)10]})] + $1,000 / (1 + .09)10
	= $935.82

This means that each 8% coupon bond is selling for 93.582% of face value. Thus, the total market value of the issue is:

Market value	= .93582 $31m
	= $29,010,526
The 9% coupon bonds are selling at 93% of face value, thus the market value of that issue is:
Market value	= .93 $36m
	= $33,480,000

Total market value	= $29,010,526 + 33,480,000
	= $62,490,526

We also need to know the yield to maturity for the 9% bonds:

PV = $930 = [(.09 $1,000) ((1 / r) {1 / [r(1 + r)¹⁵]})] + $1,000 / (1 + r)¹⁵

Using trial-and-error, a financial calculator, or a computer, we find that:

r = 9.9159%

We can now calculate the before-tax cost of debt:

Before-tax cost of debt	= WA rA + WB rB
	= [($29,010,526 / $62,490,526) .09] + [($33,480,000 / $62,490,526) .099159]
	= .0949, or 9.49%

b.
After-tax cost of debt	= Before-tax cost of debt (1 Tc)
	= 9.49% (1 .35)
	= 6.17%