Jiminyâs Cricket Farm issued a 15-year, 10 percent semiannual bond 4 years ago. The bond currently sells for 91 percent of its face value. The companyâs tax rate is 35 percent
What is the pretax cost of debt?
What is the aftertax cost of debt?
| Jiminyâs Cricket Farm issued a 15-year, 10 percent semiannual bond 4 years ago. The bond currently sells for 91 percent of its face value. The companyâs tax rate is 35 percent What is the pretax cost of debt? What is the aftertax cost of debt? |
Related questions
| Jiminyâs Cricket Farm issued a bond with 15 years to maturity and a semi-annual coupon rate of 8 percent 3 years ago. The bond currently sells for 96 percent of its face value and has a yield to maturity of 8.54%. The book value of the debt issue is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 10 years left to maturity. The book value of this issue is $35 million, the bonds sell for 51 percent of par, and their yield to maturity is 6.85%. |
| A. What is the companyâs total book value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) |
| A. Total book value | $ |
| B.What is the companyâs total market value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) |
| B. Total market value | $ |
| C. The companyâs marginal tax rate is 35 percent. What is the after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| C. Cost of debt | % |
| Jiminy's Cricket Farm issued a 30-year, 7.2 percent semiannual bond 7 years ago. The bond currently sells for 91.5 percent of its face value. The book value of this debt issue is $95 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 $65 million, and it sells for 55 percent of par. The company |
