Question

Jiminy's Cricket Farm issued a 30-year, 6.3 percent semiannual bond 7 years ago. The bond currently sells for 107.8 percent of its face value. The book value of this debt issue is $149 million. In addition, the company has a second debt issue, a zero coupon bond with 11 years left to maturity; the book value of this issue is $93 million, and it sells for 62.2 percent of par. The company’s tax rate is 24 percent.

**1**. What is the total book value of debt?
**(Do not round intermediate calculations and enter your
answer in dollars, not millions of dollars, rounded to the nearest
whole number, e.g., 1,234,567.)**

**2.** What is the total market value of debt?
**(Do not round intermediate calculations and enter your
answer in dollars, not millions of dollars, rounded to the nearest
whole number, e.g., 1,234,567.)**

**3.** What is the aftertax cost of the 6.3 percent
coupon bond? **(Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)**

**4.** What is the aftertax cost of the zero coupon
bond? **(Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)**

**5.** What is the aftertax cost of debt?
**(Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g.,
32.16.)**

Answer #1

Jiminy's Cricket Farm issued a 30-year, 6.6 percent semiannual
bond 6 years ago. The bond currently sells for 108.1 percent of its
face value. The book value of this debt issue is $152 million. In
addition, the company has a second debt issue, a zero coupon bond
with 10 years left to maturity; the book value of this issue is $99
million, and it sells for 62.5 percent of par. The company’s tax
rate is 22 percent.
What is the...

Jiminy's Cricket Farm issued a 30-year, 7.2 percent semiannual
bond 6 years ago. The bond currently sells for 87.5 percent of its
face value. The book value of this debt issue is $103 million. In
addition, the company has a second debt issue, a zero coupon bond
with 9 years left to maturity; the book value of this issue is $62
million, and it sells for 59 percent of par. The company’s tax rate
is 38 percent.
What is the...

Jiminy’s Cricket Farm issued a 30-year, 6 percent semiannual
bond three years ago. The bond currently sells for 93 percent of
its face value. The book value of the debt issue is $95 million. In
addition, the company has a second debt issue on the market, a zero
coupon bond with eight years left to maturity; the book value of
this issue is $40 million, and the bonds sell for 67 percent of
par. The company’s tax rate is 22...

Shanken Corp. issued a 15-year, 4.1 percent semiannual bond 2
years ago. The bond currently sells for 88 percent of its face
value. 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 with 12 years left to maturity; the book value of this
issue is $35 million and the bonds sell for 50 percent of par. The
company’s tax rate is 21 percent....

Shanken Corp. issued a 25-year, 5.5 percent semiannual bond 4
years ago. The bond currently sells for 106 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 14 years left to maturity; the book value of this
issue is $45 million and the bonds sell for 50 percent of par. The
company’s tax rate is 25 percent....

Shanken Corp. issued a 25-year, 4.3 percent semiannual bond 4
years ago. The bond currently sells for 90 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 14 years left to maturity; the book value of this
issue is $45 million and the bonds sell for 52 percent of par. The
company’s tax rate is 23 percent....

Shanken Corp. issued a 10-year, 10 percent semiannual bond 4
years ago. The bond currently sells for 94 percent of its face
value. The book value of the debt issue is $55 million. In
addition, the company has a second debt issue on the market, a zero
coupon bond with 14 years left to maturity; the book value of this
issue is $30 million and the bonds sell for 55 percent of par. The
company’s tax rate is 38 percent....

Jiminy’s Cricket Farm issued a 30-year, 5 percent semiannual
coupon bond 6 years ago. The bond currently sells for 106 percent
of its face value. The company’s tax rate is 25 percent.
a.
What is the company’s pretax cost of debt? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
b.
What is the company’s aftertax cost of debt? (Do not
round intermediate calculations and enter your answer as a...

Jiminy’s Cricket Farm issued a bond with 30 years to maturity
and a semiannual coupon rate of 7 percent 5 years ago. The bond
currently sells for 95 percent of its face value. The company’s tax
rate is 24 percent. The book value of the debt issue is $55
million. In addition, the company has a second debt issue on the
market, a zero coupon bond with 9 years left to maturity; the book
value of this issue is $40...

Jiminy's Cricket Farm issued a 30-year, 8 percent coupon bond 7
years ago. The bond makes semi-annual coupon payments and sells for
90 percent of its face value. The face value of the debt issue is
$24 million and the yield to maturity is 9.036%. Note: YTM for
coupon bonds is quoted as an APR with semi-annual compounding.
In addition, the company has a second debt issue on the market,
a zero coupon bond with 7 years left to maturity;...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 22 minutes ago

asked 24 minutes ago

asked 25 minutes ago

asked 29 minutes ago

asked 32 minutes ago

asked 33 minutes ago

asked 34 minutes ago

asked 35 minutes ago

asked 43 minutes ago

asked 45 minutes ago

asked 54 minutes ago

asked 1 hour ago