Business
Business, 12.08.2020 08:01, Jordandenzel

Jiminy’s Cricket Farm issued a bond with 30 years to maturity and a semiannual coupon rate of 4 percent 2 years ago. The bond currently sells for 107 percent of its face value. The company’s tax rate is 21 percent. 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, and the bonds sell for 76 percent of par. Required:
a. What is the company’s total book value of debt?
b. What is the company’s total market value of debt?
c. What is your best estimate of the aftertax cost of debt?

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Answers: 1

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Jiminy’s Cricket Farm issued a bond with 30 years to maturity and a semiannual coupon rate of 4 perc...

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