Question
Olympic Sports has two issues of debt outstanding. One is a 4% coupon bond with a face value of $34 million, a maturity of 15
Olympic Sports has two issues of debt outstanding. One is a 4% coupon bond with a face value of $34 million, a maturity of 15 years, and a yield to maturity of 5%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 5%. The face value of the issue is $39 million, and the issue sells for 93% of par value. The firm's tax rate is 20%.
a.What is the before-tax cost of debt for Olympic? please explain where information comes from
b.What is Olympic's after-tax cost of debt?
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