Question
Pearces Cricket Farm issued a 25-year, 12 percent semiannual bond 3 years ago. The bond currently sells for 94 percent of its face value. The
Pearces Cricket Farm issued a 25-year, 12 percent semiannual bond 3 years ago. The bond currently sells for 94 percent of its face value. The companys tax rate is 38 percent. Suppose the book value of the debt issue is $40 million. In addition, the company has a second debt issue on the market, a zero coupon bond annually with 14 years left to maturity; the book value of this issue is $45 million and the bonds sell for 53 percent of par. What is the companys total book value of debt? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) Total book value $ What is the companys total market value of debt? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) Total market value $ What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
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