Question
Jiminys Cricket Farm issued a 30-year, 6 percent semiannual coupon bond 4 years ago. The bond currently sells for 105 percent of its face value.
Jiminys Cricket Farm issued a 30-year, 6 percent semiannual coupon bond 4 years ago. The bond currently sells for 105 percent of its face value. The companys tax rate is 23 percent. The book value of the debt issue is $60 million. In addition, the company has a second debt issue, a zero coupon bond with 8 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 67 percent of par.
A. What is the companys total book value of debt?
B. What is the companys total market value of debt?
C. What is the aftertax cost of debt?
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