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.) a. Total book value b. Total market value c. Cost of debt %
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.) a. Total book value b. Total market value c. 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
Problem 1PS
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Transcribed Image Text: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.)
a. Total book value
b. Total market value
c. Cost of debt
%
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