Olympic Sports has two issues of debt outstanding. One is a 9% coupon bond with a face value of $32 million, a maturity of 15 years, and a yield to maturity of 10%. The coupons are paid annually. The oth has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 10%. The face value of the issue is $37 million, and the issue sells for 92% of par value. The firm's tax rate is 35%. a. What is the before-tax cost of debt for Olympic? b. What is Olympic's after-tax cost of debt?

Olympic Sports has two issues of debt outstanding. One is a 9% coupon bond with a face value of $32 million, a maturity of 15 years, and a yield to maturity of 10%. The coupons are paid annually. The oth has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 10%. The face value of the issue is $37 million, and the issue sells for 92% of par value. The firm's tax rate is 35%. a. What is the before-tax cost of debt for Olympic? b. What is Olympic's after-tax 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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Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond with a face value of $26 million, a maturity of 15 years, and a yield to maturity of 8%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 8%. The face value of the issue is $31 million, and this issue sells for 96% of par value. The firms tax rate is 35%. a). What is the before-tax cost of debt for Olympic? b). What is Olympics after-tax cost of debt? (For all requirements, do not round intermediate calculations. Enter your answers as a percent to 2 decimal places.)
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Olympic Sports has two issues of debt outstanding. One is a 9% coupon bond with a face value of $20 million, a maturity of 10 years, and a yield to maturity of 10%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with coupons also paid annually, and a coupon rate of 10%. The face value of the issue is $25 million, and the issue sells for 94% of par value. The firm's tax rate is 21%. What is the before-tax cost of debt for Olympic? What is Olympic's after-tax cost of debt? Note: For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
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