Olympic Sports has two issues of debt outstanding. One is a 9% coupon bond with a face
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Question:
Olympic Sports has two issues of debt outstanding. One is a 9% coupon bond with a face value of $32 million, a maturity of 15 years, and a yield to maturity of 10%. 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 10%. The face value of the issue is $37 million, and the issue sells for 92% of par value. The firm's tax rate is 35%. |
a. | What is the before-tax cost of debt for Olympic? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
Before-tax cost of debt | % |
b. | What is Olympic's after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
After-tax cost of debt | % |
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