Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.58 percent, a par value of $1,000 per bond, matures in 6 years, has a total face value of $4.0 million, and is quoted at 105 percent of face value. The second issue has a coupon rate of 6.26 percent, a par value of $2,000 per bond, matures in 25 years, has a total face value of $8.3 million, and is quoted at 93 percent of face value. Both bonds pay interest semiannually. The company's tax rate is 35 percent. What is the firm's weighted average aftertax cost of debt?
Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.58 percent, a par value of $1,000 per bond, matures in 6 years, has a total face value of $4.0 million, and is quoted at 105 percent of face value. The second issue has a coupon rate of 6.26 percent, a par value of $2,000 per bond, matures in 25 years, has a total face value of $8.3 million, and is quoted at 93 percent of face value. Both bonds pay interest semiannually. The company's tax rate is 35 percent. What is the firm's weighted average aftertax cost of debt?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Great Lakes Packing has two bond issues outstanding. The first issue has a coupon
rate of 3.58 percent, a par value of $1,000 per bond, matures in 6 years, has a total
face value of $4.0 million, and is quoted at 105 percent of face value. The second
issue has a coupon rate of 6.26 percent, a par value of $2,000 per bond, matures in
25 years, has a total face value of $8.3 million, and is quoted at 93 percent of face
value. Both bonds pay interest semiannually. The company's tax rate is 35 percent.
What is the firm's weighted average aftertax cost of debt?
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