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?

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?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter20: Hybrid Financing: Preferred Stock, Warrants, And Convertibles

Section: Chapter Questions

Problem 1P: Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually...

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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?
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 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? Note: 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: Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. c. What is 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. Cost of debt %
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