Jimmy\'s Cricket Farm issued a 15-year, 6 percent semiannual bond 2 years ago Th

Question

Jimmy's Cricket Farm issued a 15-year, 6 percent semiannual bond 2 years ago The bond currently sells for 95 percent of its face value. The company's tax rate is 40 percent. Suppose trie 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 15 years left to maturity; the book value of this issue is S35 million, and the bonds sell for 51 percent of par. What is the company's total book value of debt? (Enter your answer in dollars, not millions of dollars, i.e. 1, 234,567.) Total book value What is the company's total market value of debt? (Enter your answer in dollars, not millions of dollars, i.e. 1, 234,567.) Total market value What is your best estimate of the aftertax cost of debt? (Round your answer to 2 decimal places, (e.g., 32.16)) Cost of debt

Explanation / Answer

Total book value = 35$ millions = 35,000,000 dollors

Total market value of debt = 60$ + 35$ x .51 = 77.85$ million = 77,850,000 dollors

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