Question
Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond wit ha face value of $26 million, a maturity on 15
Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond wit ha face value of $26 million, a maturity on 15 years, and a yield of 8%. 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 8%. The face value of the issue is $31 million, and the issue sells for 95% of par value. The firms tax rate is 35%.
A). What is the before-tax cost of debt for Olympic?
B). What is Olympic's after-tax cost of debt?
(For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
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