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?

Essentials Of Investments
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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?

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