Question
Jiminys Cricket Farm issued a bond with 20 years to maturity and a semiannual coupon rate of 4 percent 6 years ago. The bond currently
Jiminys Cricket Farm issued a bond with 20 years to maturity and a semiannual coupon rate of 4 percent 6 years ago. The bond currently sells for 95 percent of its face value. The companys tax rate is 25 percent. The book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 7 years left to maturity, also compounded semiannually; the book value of this issue is $35 million, and the bonds sell for 74 percent of par. a. What is the companys total book value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) b. What is the companys total market value of debt? (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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