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Jiminy's Cricket Farm issued a 16-year, 6 percent semiannual bond 2 years ago. The bond currently sells for 91 percent of its face value. The
Jiminy's Cricket Farm issued a 16-year, 6 percent semiannual bond 2 years ago. The bond currently sells for 91 percent of its face value. The company's tax rate is 38 percent. Suppose the book value of the debt issue is $40 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 11 years left to maturity; the book value of this issue is $30 million, and the bonds sell for 50 percent of par. What is the company's total book value of debt? What is the company's total market value of debt? What is your best estimate of the after-tax cost of debt
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