Question
Suspect Corp. issued a bond with a maturity of 30 years and a semiannual coupon rate of 8 percent 3 years ago. The bond currently
Suspect Corp. issued a bond with a maturity of 30 years and a semiannual coupon rate of 8 percent 3 years ago. The bond currently sells for 93 percent of its face value. The book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 13 years left to maturity; the book value of this issue is $50 million and the bonds sell for 54 percent of par. The companys tax rate is 35 percent.
What is the companys total book value of debt? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) What is the companys total market value of debt? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) What is your best estimate of the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
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