Question
Olympic Sports has two issues of debt outstanding. One is an 8% coupon bond with a...
Olympic Sports has two issues of debt outstanding. One is an 8% coupon bond with a face value of $36 million, a maturity of 15 years, and a yield to maturity of 9%. 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 9%. The face value of the issue is $41 million, and the issue sells for 95% of par value. The firm's tax rate is 40%.
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 intermedia
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