Problem 14-8 Calculating Cost of Debt [LO2]
Jiminy’s Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 4 percent 5 years ago. The bond currently sells for 104 percent of its face value. The company’s tax rate is 24 percent. 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 7 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 79 percent of par.
|b.||What is the company’s total market value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.)|
|c.||What is your best estimate of the aftertax cost of debt?|
Get Answers For Free
Most questions answered within 1 hours.