Jiminy's Cricket Farm issued a 30-year, 4.8 percent semiannual bond seven years ago. The bond currently sells for 97 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 11 years left to maturity; the book value of this issue is $40 million, and the bonds sell for 61 percent of par. The company's tax rate is 22 percent. a. What is the company's total book value of debt? Note: Do not round intermediate calculations and 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: Do not round intermediate calculations and 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? Note: 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, 4.8 percent semiannual bond seven years ago. The bond currently sells for 97 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 11 years left to maturity; the book value of this issue is $40 million, and the bonds sell for 61 percent of par. The company's tax rate is 22 percent. a. What is the company's total book value of debt? Note: Do not round intermediate calculations and 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: Do not round intermediate calculations and 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? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
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, 4.8 percent semiannual bond seven years ago. The bond currently sells for 97 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 11 years left to maturity; the book value of this issue is $40 million, and the bonds sell for 61 percent of par. The
company's tax rate is 22 percent.
a. What is the company's total book value of debt?
Note: Do not round intermediate calculations and 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: Do not round intermediate calculations and 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?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
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