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Jiminy's Cricket Farm issued a 30year, 6 percent coupon bond 4 years ago. The bond makes semiannual coupon payments and sells for 91 percent of
Jiminy's Cricket Farm issued a 30year, 6 percent coupon bond 4 years ago. The bond makes semiannual coupon payments and sells for 91 percent of its face value. The face value of the debt issue is $22 million and the yield to maturity is 6.736%.. The company's tax rate is 34 percent. Note: YTM for coupon bonds is quoted as an APR with semieannuai compounding. In addition, the company has a second debt issue on the market, a zero coupon bond with 4 years left to maturity; the face value of this issue is $76 million and the bonds sell for 78 percent of face value. Note: Zeroecoupon bonds only make one payment: face value which is paid at maturity. Required: (a) What is the company's total book value of debt? (b) What is the company's total market value of debt? (c) What is the pretax cost of debt for the zero coupon bond? Report this as an APR with semiannual compounding. (Enter your answer as a percent, rounding to three decimals.) (d) What is your best estimate of the aftertax cost of debt? Report this as an APR with semiannual compounding. (Do not round your intermediate calculations.)
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