Question

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 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.) |

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.) |

What is the aftertax cost of the 6.6 percent coupon bond?
(Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g.,
32.16.) |

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.) |

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, 6.3 percent semiannual
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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
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Jiminy's Cricket Farm issued a 30-year, 7.2 percent semiannual
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coupon bond 6 years ago. The bond currently sells for 106 percent
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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
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Jiminy’s Cricket Farm issued a bond with 30 years to maturity
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a.
What is the pretax cost of debt? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places, e.g., 32.16.)
Pretax cost of debt
%
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Enter your answer as a percentage, omit the "%" sign in your
response, and round your answer to 2 decimal places. For example,
0.12345 or 12.345% should be entered as 12.35.) Please provide a
step-by-step solution so...

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