Question
Jiminys Cricket Farm issued a bond with 30 years to maturity and a semiannual coupon rate of 7 percent 5 years ago. The bond currently
Jiminys Cricket Farm issued a bond with 30 years to maturity and a semiannual coupon rate of 7 percent 5 years ago. The bond currently sells for 95 percent of its face value. The companys tax rate is 24 percent. The book value of the debt issue is $55 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 9 years left to maturity, also compounded semiannually; the book value of this issue is $40 million, and the bonds sell for 64 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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