Question
Jiminy's Cricket Farm issued a 15-year, 4.9 percent semiannual bond 4 years ago. The bond currently sells for 96 percent of its face value. The
| Jiminy's Cricket Farm issued a 15-year, 4.9 percent semiannual bond 4 years ago. The bond currently sells for 96 percent of its face value. The book value of the debt issue is $45 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 14 years left to maturity; the book value of this issue is $30 million, and the bonds sell for 51 percent of par. The companys tax rate is 24 percent. |
| a. | What is the company's total book value of debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) |
| b. | What is the company's total market value of debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) |
| c. | What is your best estimate of the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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Managing Finance
Authors: CMI Books
1st Edition
1781252181, 978-1781252185
