Jiminy's Cricket Farm issued a 30-year, 5.6 percent semiannual bond 2 years ago. The bond currently sells for 107 percent of its face value. The book value of the debt issue is $55 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 $50 million, and the bonds sell for 51 percent of par. The company’s tax rate is 21 percent. a. What is your best estimate of 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.).

Jiminy's Cricket Farm issued a 30-year, 5.6 percent semiannual bond 2 years ago. The bond currently sells for 107 percent of its face value. The book value of the debt issue is $55 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 $50 million, and the bonds sell for 51 percent of par. The company’s tax rate is 21 percent. a. What is your best estimate of 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.).

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EA: Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the...

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Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
Waylan Sisters Inc. issued 3-year bonds with a par value of $100,000 and a 6% annual coupon when the market rate of interest was 5%. If the bonds sold at 102.438, how much cash did Williams Sisters Inc. receive from issuing the bonds?
Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
On July 1, Somerset Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. Assuming the bonds sold at 58.55, what was the selling price of the bonds? Explain why the cash received from selling this bond is different from the $200,000 face value of the bond.
Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
Jiminy's Cricket Farm issued a 30-year, 5.2 percent semiannual bond 4 years ago. The bond currently sells for 104 percent of its face value. 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 11 years left to maturity; the book value of this issue is $50 million, and the bonds sell for 54 percent of par. The company's tax rate is 22 percent. a. What is the company's total book value of debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1.234,567) b. What is the company's total market value of debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, eg, 1,234,567,) c. What is your best estimate of the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 3 2.16)
Jiminy’s Cricket Farm issued a 30-year, 4.5 percent semiannual bond three years ago. The bond currently sells for 104 percent of its face value. The book value of the debt issue is $75 million. In addition, the company has a second debt issue on the market, a zero coupon bond with eight years left to maturity; the book value of this issue is $30 million, and the bonds sell for 81 percent of par. The company’s tax rate is 22 percent. a. What is the company’s total book value of debt? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) 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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Jiminy’s Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 6 percent 5 years ago. The bond currently sells for 108 percent of its face value. The company’s tax rate is 24 percent. The book value of the debt issue is $55 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 8 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 79 percent of par. What is the company's total book value of debt? What is the company's total market value of debt? What is your best estimate of the aftertax cost of debt?
Jiminy’s Cricket Farm issued a bond with 15 years to maturity and a semiannual coupon rate of 5 percent 3 years ago. The bond currently sells for 92 percent of its face value. The company’s tax rate is 22 percent. The book value of the debt issue is $35 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 8 years left to maturity; the book value of this issue is $20 million, and the bonds sell for 65 percent of par. a. What is the company’s total book value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) 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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Jiminy's Cricket Farm issued a 25-year, 10 percent semiannual bond 3 years ago. The bond currently sells for 93 percent of its face value. The book value of the debt issue is $45 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 13 years left to maturity; the book value of this issue is $45 million and the bonds sell for 52 percent of par. The company's tax rate is 24 percent. a. What is the company's total book value of debt? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567. b. What is the company's total market value of debt? Note: Do not round intermediate calculations and 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? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Total book value b. Total market value c.…
Jiminy’s Cricket Farm issued a 30-year, 6 percent semiannual coupon bond 4 years ago. The bond currently sells for 105 percent of its face value. The company’s tax rate is 23 percent. The book value of the debt issue is $60 million. In addition, the company has a second debt issue, a zero coupon bond with 8 years left to maturity; the book value of this issue is $35 million, and the bonds sell for 67 percent of par. a. What is the company’s total book value of debt? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) 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 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.)
Jiminy’s Cricket Farm issued a 25-year, 6 percent semiannual coupon bond 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 $35 million. In addition, the company has a second debt issue, a zero coupon bond with 9 years left to maturity; the book value of this issue is $20 million, and the bonds sell for 68 percent of par. c. What is the aftertax cost of debt?