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Skyhawk Inc. has issued three different series of bonds. The first was issued twenty-one years ago at a total par value of $40 million and
Skyhawk Inc. has issued three different series of bonds. The first was issued twenty-one years ago at a total par value of $40 million and pays an annual coupon rate of 7.00%. The second series consists of pure discount bonds that mature in twelve years and had an original face value of $20 million. The third series of bonds has fifteen years remaining and pays an annual coupon rate of 8.00% with semi-annual coupon payments. The third bond issue was issued with a total par value of $35 million and is selling in the market today at 112.366. The current tax rate is 21%.
1. what is the value of the second bond issue?
2.what is the market value of debt?
3.what is the pretax cost of debt?what is the aftertax cost?
*current market rate of interest-6.68%
*value of first bond issue- 40.84 mil
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