Pearce's Cicket Farm issued a 15-year, 10% semiannual bond 4 years ago. The bond currenty sells for 91% of its face value. The company's tax rate ts 38% Suppose the book value of the debt issue is $60 milion. 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 $35 milion and the bonds sell for 5ot par. Assume the par value of the bond is $1,000. What is the company's total book value of debt? (Enter the answer in dollars. Omit $ sign in your response.) Total book value $ (95000000 What is the company's total market value of debt? (Enter the enswer in dollers. Omit S sign in your response Total market value $ 85200000 What is your best estimate of the after-tax cost of debt? (Do not round Intermediete calculetions. Enter your answer es a percentege rounded to 2 decimel pleces.) Cost of debt

Pearce's Cicket Farm issued a 15-year, 10% semiannual bond 4 years ago. The bond currenty sells for 91% of its face value. The company's tax rate ts 38% Suppose the book value of the debt issue is $60 milion. 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 $35 milion and the bonds sell for 5ot par. Assume the par value of the bond is $1,000. What is the company's total book value of debt? (Enter the answer in dollars. Omit $ sign in your response.) Total book value $ (95000000 What is the company's total market value of debt? (Enter the enswer in dollers. Omit S sign in your response Total market value $ 85200000 What is your best estimate of the after-tax cost of debt? (Do not round Intermediete calculetions. Enter your answer es a percentege rounded to 2 decimel pleces.) Cost of debt

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 1PROB

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